There were quite a few developments in the airline industry that grabbed headlines last week. However, the havoc wreaked by Tropical Storm Harvey in Houston, overshadowed everything as operations of key airline participants like United Continental Holdings (UAL - Free Report) — as it relies extensively on its hub at Houston — were adversely impacted.
The Harvey havoc apart, major U.S.-based carriers like Delta Air Lines (DAL - Free Report) and American Airlines Group (AAL - Free Report) were laid low following the announcement of Iceland-based low-cost carrier WOW Air to expand into four U.S. destinations — all in the Midwest.
On a cheerful note, low-cost carrier Southwest Airlines Co. (LUV - Free Report) announced plans to introduce additional routes with focus on CA. The Dallas- based carrier also intends to bolster its Mexican service. Updates on route expansion were also available from Alaska Airlines, the wholly-owned subsidiary of Alaska Air Group (ALK - Free Report) and Spirit Airlines (SAVE - Free Report) over the last week.
On the price front, the NYSE ARCA Airline Index was almost flat at $105.7.
(Read the last Airline Stock Roundup for Aug 23, 2017).
Recap of the Past Week’s Most Important Stories
1. Major U.S. carriers shed value on Aug 23, on fears of intensifying competition in the transatlantic market, following the decision of WOW Air to expand services to Detroit, St. Louis, Cleveland, and Cincinnati. Following the expansion, the total number of U.S. cities served by the carrier will increase to 12 (read more: Airline Stocks Sink as WOW Air Expands into the Midwest).
2. Tropical Storm Harvey, which causing heavy rainfall in Houston, TX, has caused airlines to cancel multiple flights. The misery is expected to continue this week with two Houston airports — George Bush Intercontinental Airport and William P. Hobby Airport — closed due to heavy rains. In fact, profits of carriers are likely to be severely dented. United Continental is expected to be the worst hit, with losses exceeding $200 million (read more: Airline Operations Disrupted as Harvey Wreaks Havoc).
3. Alaska Airlines has begun daily, nonstop services from San Jose, CA to Austin, TX and Tucson, AZ. Following these additional flights, the company expanded its presence in California, offering nonstop services to 18 destinations from Mineta San Jose International Airport. The flights are add-ons to the previously announced routes from San Jose to Newark, NJ; Burbank, CA and Los Angeles, CA. Flights connecting San Jose with Newark began on Mar 12 and that plying between San Jose and Burbank started on Mar 16 (read more: Alaska Air Group Arm Adds Flights From San Jose, California).
Alaska Air Groupcarries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
4. In a bid to expand further, Southwest Airlines announced plans to add 19 routes from different cities in CA. The carrier also intends to start nonstop seasonal flights from Apr 14, 2018. The flights will operate on Saturdays between Cancun, Columbus, Ohio, and New Orleans. Despite the expansion plan, the carrier continues to expect capacity (available seat miles) growth of less than 4% in the first half of 2018. The metric is expected to grow at less than its 2016 year-over-year growth of 5.7% for full-year 2018.
5. In a customer-friendly move, Spirit Airlines decided to launch four routes from Nov 9 to facilitate reaching New Orleans. Flights connecting New Orleansto Boston Newark and Tampa will operate daily. However, flights connecting Minneapolis/St. Paul (MSP) to/from New Orleans will ply four times a week.
The following table shows the price movement of the major airline players over the past week and during the last six months.
Last 6 months
The table above shows that all airline stocks barring GOL Linhas (GOL - Free Report) traded in the red in the past week mainly due to the negative impact of Harvey. Over the last six months, the sector tracker lost 2.9% due to multiple headwinds like capacity woes, Spain attacks and Harvey. Shares of Spirit Airlines depreciated the most (30.6%) during the period.
What's Next in the Airline Space?
We expect August traffic reports from the likes of Delta in the coming days.
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