We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
It was a week that saw the NYSE ARCA Airline Index declining 4.1% mainly due to the disappointing unit revenue forecast of low-cost carrier Southwest Airlines Co. (LUV - Free Report) for the current quarter. The Dallas-based carrier attributed the downbeat forecast to pricing pressure and lower-than-expected demand for air travel due to the timing of the spring break holidays.
Apart from the bleak forecast, airlines were also hurt by the emergence of another nor’easter (Toby) in the Northeast region. In fact, this was the fourth nor’easter to hit the region this month. American Airlines Group Inc. (AAL - Free Report) was also in the news over the past five trading days regarding its fleet upgrade efforts.
Moreover, the week saw American Airlines and United Airlines — the wholly-owned subsidiary of United Continental Holdings, Inc. (UAL - Free Report) — issuing updates on their plans to add additional flights in a bid to expand their presence.
1. Southwest Airlines now expects revenue per available seat mile (RASM: a key measure of unit revenue) to be flat, as against the year-ago figure of 13.23 cents. The projection compares unfavorably to the previous forecast of year-over-year growth between 1% and 2%. However, current customer demand remains strong, according to Southwest. The carrier still continues to expect year-over-year RASM growth in 2018.
Further, the company has lowered its outlook for first-quarter operating expenses per available seat mile (CASM) excluding fuel and oil expense plus profit-sharing expense. Additionally, first-quarter fuel costs are expected to be at approximately $2.10 per gallon (Read more: Airline Stocks Decline on Wednesday's Trading: Here's Why).
2. Airline operations were disrupted when Toby hit the Northeast, resulting in multiple flight cancellations. In fact, the current month has reportedly seen more than 10,000 flights being called off due to successive nor’easters. Notably, it is believed to be the worst March in five years time in terms of flight cancellations (Read more: Airline Operations Disrupted Due to Another Nor'easter).
3. According to a Reuters report American Airlines has ended its negotiations with Airbus to buy multiple planes, in a bid to upgrade its fleet. Replacing Airbus, as a potential supplier to American Airlines was The Boeing Company (BA - Free Report) . American Airlines is reportedly looking to purchase 25-30 new wide-bodied jets. The deal with Boeing might be valued between $7 billion and $8.5 billion.
On a separate issue, American Airlines announced its intention to launch flights to four cities — Georgetown, Guyana, Pereira, Colombia, Cordoba, Argentina, Oaxaca, Mexico and Buenos Aires, Argentina. The new routes will be operational subject to government clearance. Tickets will be available from April 2018.
4. The association between United Airlines and Air New Zealand was strengthened when the carriers announced their decision to operate flights connecting Chicago and Auckland. The non-stop year-round flights, operated by Air New Zealand thrice a week, will commence from Nov 30, 2018. Moreover, United Airlines announced that its flights connecting San Francisco and Auckland, which currently operate on a seasonal basis, will fly throughout the year (thrice a week) from April 2019. The service has been expanded to cater to the increased demand.
5. Alaska Air Group’s (ALK - Free Report) subsidiary — Alaska Airlines — inked a deal with Irish carrier, Aer Lingus, for providing members of its Mileage Plan more opportunities to earn and redeem miles to Europe. According to the new partnership, the carriers will commence interline availability across their respective networks from April 2018. Aer Lingus currently operates flights connecting Dublin and 13 cities in North America. The carrier will operate flights connecting Seattle and Dublin from May 18, 2018.
Price Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
The table above shows most of the airline stocks traded in the red over the past week mainly due to Southwest’s bearish guidance. Over the course of six months, the NYSE ARCA Airline Index appreciated 6.9%, on the back of impressive gains at Gol Linhas Aéreas Inteligentes S.A. .
What's Next in the Airline Space?
Investors will look forward to March traffic reports from the likes of Delta Air Lines Inc. (DAL - Free Report) in the coming days.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Airline Stock Roundup: LUV's Bleak Q1 RASM View, UAL's Expansion Update & More
It was a week that saw the NYSE ARCA Airline Index declining 4.1% mainly due to the disappointing unit revenue forecast of low-cost carrier Southwest Airlines Co. (LUV - Free Report) for the current quarter. The Dallas-based carrier attributed the downbeat forecast to pricing pressure and lower-than-expected demand for air travel due to the timing of the spring break holidays.
Apart from the bleak forecast, airlines were also hurt by the emergence of another nor’easter (Toby) in the Northeast region. In fact, this was the fourth nor’easter to hit the region this month. American Airlines Group Inc. (AAL - Free Report) was also in the news over the past five trading days regarding its fleet upgrade efforts.
Moreover, the week saw American Airlines and United Airlines — the wholly-owned subsidiary of United Continental Holdings, Inc. (UAL - Free Report) — issuing updates on their plans to add additional flights in a bid to expand their presence.
Transportation - Airline Industry 5YR % Return
Transportation - Airline Industry 5YR % Return
(Read the last Airline Stock Roundup for Mar 21, 2018).
Recap of the Past Week’s Most Important Stories
1. Southwest Airlines now expects revenue per available seat mile (RASM: a key measure of unit revenue) to be flat, as against the year-ago figure of 13.23 cents. The projection compares unfavorably to the previous forecast of year-over-year growth between 1% and 2%. However, current customer demand remains strong, according to Southwest. The carrier still continues to expect year-over-year RASM growth in 2018.
Further, the company has lowered its outlook for first-quarter operating expenses per available seat mile (CASM) excluding fuel and oil expense plus profit-sharing expense. Additionally, first-quarter fuel costs are expected to be at approximately $2.10 per gallon (Read more: Airline Stocks Decline on Wednesday's Trading: Here's Why).
2. Airline operations were disrupted when Toby hit the Northeast, resulting in multiple flight cancellations. In fact, the current month has reportedly seen more than 10,000 flights being called off due to successive nor’easters. Notably, it is believed to be the worst March in five years time in terms of flight cancellations (Read more: Airline Operations Disrupted Due to Another Nor'easter).
3. According to a Reuters report American Airlines has ended its negotiations with Airbus to buy multiple planes, in a bid to upgrade its fleet. Replacing Airbus, as a potential supplier to American Airlines was The Boeing Company (BA - Free Report) . American Airlines is reportedly looking to purchase 25-30 new wide-bodied jets. The deal with Boeing might be valued between $7 billion and $8.5 billion.
On a separate issue, American Airlines announced its intention to launch flights to four cities — Georgetown, Guyana, Pereira, Colombia, Cordoba, Argentina, Oaxaca, Mexico and Buenos Aires, Argentina. The new routes will be operational subject to government clearance. Tickets will be available from April 2018.
American Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
4. The association between United Airlines and Air New Zealand was strengthened when the carriers announced their decision to operate flights connecting Chicago and Auckland. The non-stop year-round flights, operated by Air New Zealand thrice a week, will commence from Nov 30, 2018. Moreover, United Airlines announced that its flights connecting San Francisco and Auckland, which currently operate on a seasonal basis, will fly throughout the year (thrice a week) from April 2019. The service has been expanded to cater to the increased demand.
5. Alaska Air Group’s (ALK - Free Report) subsidiary — Alaska Airlines — inked a deal with Irish carrier, Aer Lingus, for providing members of its Mileage Plan more opportunities to earn and redeem miles to Europe. According to the new partnership, the carriers will commence interline availability across their respective networks from April 2018. Aer Lingus currently operates flights connecting Dublin and 13 cities in North America. The carrier will operate flights connecting Seattle and Dublin from May 18, 2018.
Price Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
The table above shows most of the airline stocks traded in the red over the past week mainly due to Southwest’s bearish guidance. Over the course of six months, the NYSE ARCA Airline Index appreciated 6.9%, on the back of impressive gains at Gol Linhas Aéreas Inteligentes S.A. .
What's Next in the Airline Space?
Investors will look forward to March traffic reports from the likes of Delta Air Lines Inc. (DAL - Free Report) in the coming days.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>