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In the past week, Southwest Airlines (LUV - Free Report) received encouraging tidings on the labor front when it reached an Agreement in Principle (AIP) on a new contract with its pilots’ union. LUV was also in the news, albeit for the wrong reasons when the U.S. Department of Transportation or DOT levied a fine of $140 million on the Dallas-based carrier for consumer protection violations during the holidays last year.
Akin to the Thanksgiving holiday period last month, Delta Air Lines (DAL - Free Report) expects to attract huge traffic in the upcoming winter holiday. To meet the anticipated winter demand swell, Alaska Airlines, the wholly-owned subsidiary of Alaska Air Group (ALK - Free Report) , launched nine non-stop routes. An update on the expanding network was also available from JetBlue Airways (JBLU - Free Report) in the past week. Meanwhile, ALK’s management tweaked its outlook for the fourth quarter of 2023.
Recap of the Past Week’s Most Important Stories
1. Riding on the buoyant air-travel demand scenario, Delta expects 9 million people to avail of its flights during the winter holiday travel period (Dec 21, 2023-Jan 7, 2024). In the event of the air traffic projection coming true, Delta’s fourth-quarter 2023 results will gain.
2. The expanded network by ALK includes flights to the Bahamas and Guatemala. A new service also started between Las Vegas and two cities in Mexico. A seasonal flight has begun connecting Palm Springs and New York City. New routes have been functional since Dec 14, 2023. All the routes will continue operating till Apr 15, 2024, except for flights connecting Los Angeles with Guatemala City and Nassau (functional throughout the year).
On a separate note, ALK’s management expects to repurchase shares worth $145 million in 2023. Capex for the current year is expected to be $1.6-$1.7 billion. The same is expected to be $1.4-$1.5 billion for 2024. Revenues for fourth-quarter 2023 are expected to increase 2.25-3.25% from the fourth-quarter 2022 actuals (earlier view: up 1-4%). Non-fuel unit costs are expected to decline 5% in the December quarter (the earlier view called for a 3-5% decline). For the fourth quarter of 2023, Alaska Air expects a capacity improvement of 11-14% from the year-ago reported figure. Cost per available seat mile, excluding fuel and special items, is expected to decline 3-5% year over year. Total revenues are anticipated to grow 1-4% year over year. ALK forecasts economic fuel cost per gallon of $3.40 (earlier expectation was pegged at $3.30-$3.40). The adjusted pre-tax margin is anticipated to be 1% (earlier expectation was between 0% and 2%).
3. After three and half years of negotiations for higher pay and better working conditions, the Southwest Airlines Pilots Association reached an AIP with LUV on a new contract. The agreement will now be evaluated by the pilots’ union. The AIP will become a tentative deal if approved by the board. After that, the provisional deal will be voted on by LUV’s 11,000-plus pilots. The deal will materialize only if the voting outcome is favorable.
On a separate note, LUV was slapped with a $140-million fine by the DOT for flouting consumer protection laws during and after the operational failures that resulted in the cancellation of 16,900 flights, stranding more than two million passengers over the 2022 Christmas holiday and into the New Year. This penalty is 30 times larger than any previous fine imposed by DOT for consumer protection violations.
LUV was also in the news recently when it gave an increased fuel cost per gallon outlook for the fourth quarter of 2023. That story was covered in detail in the previous week’s write-up.
4. In response to buoyant air travel demand, JBLU’s management decided to serve another Mexico destination, after Cancun, Puerto Vallarta and Los Cabos, to expand its network. To this end, JBLU will have daily non-stop flights to Tulum from New York’s John F. Kennedy International Airport. JBLU flights will operate on the route starting Jun 13, 2024.
Price Performance
The following table shows the price movement of major airline players over the past week and during the past six months.
Image Source: Zacks Investment Research
The table above shows that most airline stocks traded in the green over the past week. However, the gains were muted in nature. Consequently, the NYSE ARCA Airline Index improved marginally to $67.55 over the past week. Over the course of six months, the sector tracker declined 9.7%.
What's Next in the Airline Space?
Stay tuned for the usual news updates in the space.
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Airline Stock Roundup: LUV's Update on Labor Front, DAL's Rosy Winter Travel View
In the past week, Southwest Airlines (LUV - Free Report) received encouraging tidings on the labor front when it reached an Agreement in Principle (AIP) on a new contract with its pilots’ union. LUV was also in the news, albeit for the wrong reasons when the U.S. Department of Transportation or DOT levied a fine of $140 million on the Dallas-based carrier for consumer protection violations during the holidays last year.
Akin to the Thanksgiving holiday period last month, Delta Air Lines (DAL - Free Report) expects to attract huge traffic in the upcoming winter holiday. To meet the anticipated winter demand swell, Alaska Airlines, the wholly-owned subsidiary of Alaska Air Group (ALK - Free Report) , launched nine non-stop routes. An update on the expanding network was also available from JetBlue Airways (JBLU - Free Report) in the past week. Meanwhile, ALK’s management tweaked its outlook for the fourth quarter of 2023.
Recap of the Past Week’s Most Important Stories
1. Riding on the buoyant air-travel demand scenario, Delta expects 9 million people to avail of its flights during the winter holiday travel period (Dec 21, 2023-Jan 7, 2024). In the event of the air traffic projection coming true, Delta’s fourth-quarter 2023 results will gain.
2. The expanded network by ALK includes flights to the Bahamas and Guatemala. A new service also started between Las Vegas and two cities in Mexico. A seasonal flight has begun connecting Palm Springs and New York City. New routes have been functional since Dec 14, 2023. All the routes will continue operating till Apr 15, 2024, except for flights connecting Los Angeles with Guatemala City and Nassau (functional throughout the year).
On a separate note, ALK’s management expects to repurchase shares worth $145 million in 2023. Capex for the current year is expected to be $1.6-$1.7 billion. The same is expected to be $1.4-$1.5 billion for 2024. Revenues for fourth-quarter 2023 are expected to increase 2.25-3.25% from the fourth-quarter 2022 actuals (earlier view: up 1-4%). Non-fuel unit costs are expected to decline 5% in the December quarter (the earlier view called for a 3-5% decline). For the fourth quarter of 2023, Alaska Air expects a capacity improvement of 11-14% from the year-ago reported figure. Cost per available seat mile, excluding fuel and special items, is expected to decline 3-5% year over year. Total revenues are anticipated to grow 1-4% year over year. ALK forecasts economic fuel cost per gallon of $3.40 (earlier expectation was pegged at $3.30-$3.40). The adjusted pre-tax margin is anticipated to be 1% (earlier expectation was between 0% and 2%).
Currently, ALK carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. After three and half years of negotiations for higher pay and better working conditions, the Southwest Airlines Pilots Association reached an AIP with LUV on a new contract. The agreement will now be evaluated by the pilots’ union. The AIP will become a tentative deal if approved by the board. After that, the provisional deal will be voted on by LUV’s 11,000-plus pilots. The deal will materialize only if the voting outcome is favorable.
On a separate note, LUV was slapped with a $140-million fine by the DOT for flouting consumer protection laws during and after the operational failures that resulted in the cancellation of 16,900 flights, stranding more than two million passengers over the 2022 Christmas holiday and into the New Year. This penalty is 30 times larger than any previous fine imposed by DOT for consumer protection violations.
LUV was also in the news recently when it gave an increased fuel cost per gallon outlook for the fourth quarter of 2023. That story was covered in detail in the previous week’s write-up.
4. In response to buoyant air travel demand, JBLU’s management decided to serve another Mexico destination, after Cancun, Puerto Vallarta and Los Cabos, to expand its network. To this end, JBLU will have daily non-stop flights to Tulum from New York’s John F. Kennedy International Airport. JBLU flights will operate on the route starting Jun 13, 2024.
Price Performance
The following table shows the price movement of major airline players over the past week and during the past six months.
Image Source: Zacks Investment Research
The table above shows that most airline stocks traded in the green over the past week. However, the gains were muted in nature. Consequently, the NYSE ARCA Airline Index improved marginally to $67.55 over the past week. Over the course of six months, the sector tracker declined 9.7%.
What's Next in the Airline Space?
Stay tuned for the usual news updates in the space.