Back to top

Analyst Blog

Zacks Equity Research

Airline Stock Roundup: American Airlines' Bullish RASM View; JetBlue, Southwest Airlines in Focus

LUV JBLU DAL CPA ALK UAL AAL

Trades from $3

There is no denying the fact that the surprise victory of Donald Trump in the U.S. presidential elections was the major talking point in the last week. Though the election of the new U.S. President was undoubtedly the most important development last week, the airline space had its own share of news.

American Airlines Group (AAL - Free Report) was the major news maker, courtesy of its bullish outlook on unit revenues for the fourth quarter of 2016. The outlook was revealed alongside October traffic number announcement. JetBlue Airways (JBLU - Free Report) also unveiled its traffic report for October. The rise in revenue passenger miles (RPMs, a measure of air traffic) and load factor (percentage of seats filled with passengers) impacted the stock positively following the release of its traffic report.

The past week saw Southwest Airlines (LUV - Free Report) launching Cuban operations. Following the launch, Cuba became the ninth country to receive services of the low-cost carrier. In an environment-friendly move, Alaska Airlines, a wholly owned subsidiary of Alaska Air Group (ALK - Free Report) , operated a flight (Seattle to Washington, D.C.) using jet fuel that included a 20% mixture of the forest residuals biofuel. The carrier was also in the news due to its expansion-related and customer-friendly updates.

On the price front, NYSE ARCA Airline index climbed 3.72% to $102.01 buoyed by the news of Warren Buffett's Berkshire Hathaway betting on major carriers like Delta Air Lines Inc (DAL - Free Report) , American Airlines, Southwest Airlines Co and United Continental Holdings Inc. (UAL - Free Report) .

Transportation - Airline Industry Price Index

 

Transportation - Airline Industry Price Index

(Read the last Airline Stock Roundup for Nov 9, 2016).

Recap of the Past Week’s Most Important Stories

1. Shares of American Airlines gained following the company’s announcement of bullish fourth-quarter view for total revenue per available seat mile (TRASM: a key measure of unit revenues).The carrier now expects TRASM to decline in the band of 0.5% to 2.5% in the fourth quarter. The view represents a marked improvement from the guidance issued last month when it expected the metric to decline in the band of 1–3%. (Read more: American Airlines Group Gains on Bullish Q4 RASM View).

2. At JetBlue Airways, RPMs climbed 6.5% to – was 3.57 billion in Oct 2016. Consolidated capacity or available seat miles (ASMs) expanded 5.5% to 4.21 billion. RASM declined roughly 3% primarily due to Hurricane Matthew (Read more: JetBlue Airways October Traffic and Capacity Increase).

3. Copa Holdings, S.A.(CPA - Free Report) revealed impressive traffic numbers for the month of October. RPMs improved 13.7% on a year-over-year basis to 1.5 billion. Load factor increased 900 basis points to 83.3%. This was because traffic growth outpaced capacity expansion in the month for the Zacks Rank #1 (Strong Buy) carrier. (Read more: Copa Holdings October Traffic Up 13.7% on Higher Demand).

You can see the complete list of today’s Zacks #1 Rank stocks here.

4. Southwest Airlines became the fourth US carrier with Cuban operations when it operated a flight (3914) from Fort Lauderdale-Hollywood International Airport (FLL) to Varadero, Cuba. The carrier also announced that intends to start operations from Fort Lauderdale to another Cuban destination – Santa Clara – from Dec 15, 2016, subject to approval from the Cuban government. Flights to Havana from FLL and Tampa International Airport are expected to be operational from Dec 12, again subject to approval from the Cuban government. Havana will be the 100th destination for the low-cost carrier, which expects capacity in full-year 2016 to expand in the band of 5–6%.

5. In a customer-friendly move, Alaska Airlines announced that it intends to launch a Premium Class section on Jan 5, 2017 on flights in select routes. Tickets for the roomier seats are already available. The carrier also launched flights from Bellingham, WA to Kona, HI from Nov 12, 2016. The seasonal weekly flights will operate till Apr 1, 2017. The company also launched daily flights connecting Portland, Oregon and Newark. Moreover, Alaska Airlines made history when it operated the first commercial flight using wood-sourced jet fuel. Efforts of the Washington State University-led Northwest Advanced Renewables Alliance resulted in the production of the alternative jet fuel.

Performance

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

Company

Past Week

Last 6 months

HA

1.17%

12.39%

UAL

9.68%

41.15%

GOL

-33.06%

94.38%

DAL

11.48%

10.40%

JBLU

13.13%

7.40%

AAL

9.06%

35.12%

SAVE

12.11%

30.67%

LUV

13.52%

7.39%

VA

0.18%

0.85%

ALK

8.31%

17.37%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows all airline stocks except GOL Linhas traded in the green over the past week. Shares of Southwest Airlines appreciated the most (13.52%). Over the course of six months, the NYSE ARCA Airline index appreciated 20.85%.

What's Next in the Airline Space?

With the earnings season over, stay tuned for usual news updates. Further updates on the proposed takeover of Virgin America by Alaska Air Group are also keenly awaited.


Where Do Zacks' Investment Ideas Come From?

You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>