There were quite a few developments in the airline industry that grabbed headlines last week. However, all the positives were overshadowed by the widespread sell-off that followed the mass shooting at a nightclub in Orlando and the explosion at the Shanghai Pudong airport on Jun 12. Moreover, the possibility of a decline in business travel, as uncertainty looms large over the outcome of the Brexit vote on Jun 23, weighed on airline stocks.

To add to the adversities, Long Island City, NY-based JetBlue Airways Corporation (JBLU Quick QuoteJBLU - Free Report) issued a disappointing operating revenue per average seat mile (RASM: a measure of unit revenue) and capacity growth guidance along with its May traffic release. Carriers like United Continental Holdings (UAL Quick QuoteUAL - Free Report) too unveiled a bearish unit revenue guidance while reporting May traffic numbers.

On a more cheerful note, the U.S. Department of Transportation (DOT) authorized six U.S.-based carriers including American Airlines Group (AAL Quick QuoteAAL - Free Report) , Southwest Airlines Co. (LUV Quick QuoteLUV - Free Report) and JetBlue to operate scheduled flights to nine second-tier Cuban cities, thereby taking a step toward restoration of diplomatic ties with the island nation after more than 50 years.

Overall, it was a gloomy week for the sector. Major airline stocks plummeted in the wake of the sell-offs. The upward movement in oil prices added to the woes. In view of this bearish sentiment, the NYSE ARCA Airline index declined 5.71% to $82.31 in the past week.

TRANSPORTATION-AIRLINE Industry Price Index

TRANSPORTATION-AIRLINE Industry Price Index

Read the last Airline Stock Roundup for June 8, 2016.

Recap of the Past Week’s Most Important Stories

1. Shares of major airlines stocks nosedived following the mass shooting at a nightclub in Orlando and an explosion at the Shanghai Pudong airport on Jun 12. The timing of the attacks could not have been worse as the three-month period between June and August has been predicted to be the busiest one for U.S. carriers in terms of air travel (read more: US Carriers Sell Off in Wake of Orlando & Shanghai Attacks).

  2. Amid the gloom prevailing following the mass shooting at a nightclub in Orlando, some positive news flowed in for U.S. airlines as the carriers will soon be operating commercial flights to Cuba. However, the DOT did not announce its decision on Havana routes and is expected to do so later this summer (read more: Some US Carriers Gain Approval to Fly to Cuba).

3. JetBlue saw its May air traffic move up 10.7% year over year on a 12.1% rise in capacity. Despite growth in traffic, JetBlue lowered its performance guidance for this year due to expected decrease in demand. RASM is now expected to decline by 7.5% to 8.5% for the second quarter of 2016 as compared to a decline of 7% expected earlier. The company has also lowered its capacity guidance for the year. Projected ASM growth has been lowered to a range of 8–9.5% from 8.5–10.5% expected earlier (read more: JetBlue Lowers View Despite Higher May Traffic, Stock Down).

4. United Airlines, the wholly owned subsidiary of United Continental Holdings, posted a 1.2% decrease in revenue passenger miles or RPMs (a measure of air traffic) for May 2016, while consolidated capacity (measured in average seat miles or ASMs) inched up 0.5%. The carrier also launched a new business traveler focused service, United Polaris to improve the flying experience of fliers (read more: United Airlines to Redefine Business Travel with New Service).

5 Delta Air Lines’ (DAL Quick QuoteDAL - Free Report) chief financial officer, Paul Jacobson stated at the Deutsche Bank Annual Global Industrials & Materials Summit that the company expects passenger revenue per available seat mile (PRASM: a measure of unit revenue) to decline around 4.5% in the second quarter of 2016. The earlier projection had called for a decline in the band of 2.5% to 4.5% (read more: Delta Air Lines Stock Dips on Dull Q2 Guidance).

6. American Airlines Group posted modest air traffic growth in the month of May. Traffic – measured in revenue passenger miles (RPMs) – was 19.4 billion, up 0.5% from 19.3 billion recorded last May. The carrier reiterated its forecast of a 6–8% decline in PRASM (for the second quarter of 2016. The company also continues to expect a pre-tax margin of 14% to 16% for the second quarter (read more: American Airlines' May Traffic Displays Moderate Growth).

Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months. 

The table shows that all airline stocks traded in the red over the past week mainly due to the twin acts of terror. Shares of Hawaiian Holdings (HA Quick QuoteHA - Free Report) depreciated the most (10.80%).

Over the past six months all airline stocks, barring Virgin America, lost value with the NYSE ARCA Airline index declining 7.19%. Shares of American Airlines have shed the maximum (28.73%) over the same period.

What's Next in the Airline Space?

We expect May traffic updates from the likes of GOL Linhas over the coming days. Moreover, passenger airline employment data for April is expected to be released by the U.S. Department of Transportation’s Bureau of Transportation Statistic over the next few days.

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