Delta Air Lines ( DAL Quick Quote DAL - Free Report) CEO Ed Bastian stated in a memo to its employees that he expects the carrier to achieve a positive cash flow by the spring of 2021. With the vaccination against coronavirus already ongoing and more vaccines awaiting an approval in the year ahead, airlines are hoping that passenger traffic will pick up in the current year. American Airlines ( AAL Quick Quote AAL - Free Report) was also in news, courtesy of its decision to tweak its policy regarding passengers travelling with emotional support animals on board. The move followed the U.S. Department of Transportation’s (DOT) order to tighten the noose on passengers flying with service animals.
In this context, American Airlines becomes the second carrier after Alaska Airlines to announce changes in its policy. Notably, Alaska Airlines is the wholly-owned subsidiary of
Alaska Air Group ( ALK Quick Quote ALK - Free Report) . The update on Alaska Air’s decision was mentioned in the previous week’s write-up. Recap of the Past Week’s Most Important Stories
1. Per a
Reuters report, Ed Bastian believes that Delta will generate positive cash flow by this spring. In a New Year note to the employees, Bastian stated that the company will likely “experience two distinct phases during the next 12 months”. The first phase will be quite similar to 2020. Meanwhile, “the second phase will begin only when we reach a turning point with widely available vaccinations that spur a significant return to travel, particularly business travel”. Similar sentiments were echoed by Alaska Airlines president Ben Minicucci, who was quoted saying: “We’re confident that things will get better in the second quarter and definitely in the second half of the year”.
2 In a bid to attract more traffic during spring,
Southwest Airlines ( LUV Quick Quote LUV - Free Report) announced a four-day WOW Sale through Jan 7, offering customers one-way fares as low as $29 for travel across the United States. Apart from this customer-friendly move, the Dallas-based carrier also grabbed headlines when it reached a full-participation distribution agreement with Sabre Corporation that will allow business customers a continued access to the carrier’s low fares and legendary customer service in 2021 and beyond.
Southwest Airlines carries a Zacks Rank #3 (Hold), currently. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. Per the DOT’s revised rule, effective Jan 11, a service animal is defined as a dog trained to do work or perform tasks for a differently abled individual. From the above-mentioned date, American Airlines “will no longer authorize new travel” for emotional support animals. However, the airline will consider the existing bookings involving emotional support animals through Feb 1, 2021 when its new policy gets enforced. Under the new policy, emotional support animals will no longer be allowed to travel on the American Airlines flights other than as carry-on pets or in the cargo.
Next month onward, customers travelling with their service animals will be required to fill in a DOT form, confirming that their animal is properly trained and vaccinated, and will behave appropriately during the flight. The form is needed to be submitted electronically 48 hours prior to the flight journey, unless booking is done at the last moment. The authorization of a service animal will be valid for a year or until the expiration of its vaccination.
Ryanair Holdings ( RYAAY Quick Quote RYAAY - Free Report) posted disappointing traffic numbers for December, primarily due to weak air travel demand, stemming from the COVID-19 pandemic. This Ireland-based carrier reported an 83% year-over-year plunge in December traffic to merely 1.9 million passengers. Load factor (% of seats filled with passengers) came in at 73%. On a rolling-annual basis, traffic at Ryanair declined 66% to 52.1 million.
5. Despite the surge in coronavirus cases in the United States, demand for leisure air travel is improving as evidenced by the fact that the
first Sunday of 2021 saw in excess of 1.3 million passengers being screened by the TransportationSecurity Administration, the highest reading since the onset of the pandemic. However, in a bid to boost international travel, Airlines for America, which represents most US airlines including the likes of Delta, Southwest Airlines, United Airlines ( UAL Quick Quote UAL - Free Report) and American Airlines, reportedly requested the Trump administration to introduce a global coronavirus testing program and cancel the “current entry restrictions on travelers from Europe, the United Kingdom and Brazil as soon as possible”. Performance
The following table shows the price movement of leading airline players over the past week and during the past six months.
The table above shows that most airline stocks have traded in the red over the past week, inducing the NYSE ARCA Airline Index to dip 3.1% to $80.48. However, over the course of the past six months, the NYSE ARCA Airline Index has surged 50%.
What’s Next in the Airline Space?
Investors will keenly await updates on the rising coronavirus cases including the recent discovery of the new COVID strain and its resultant effect on air travel.
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