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Airline Stock Roundup: April Traffic Reports from UAL, DAL, LUV & More

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With the Q1 earnings season at the tail end, April traffic reports from airlines dominated headlines over the past five trading days. Evidently, key airline players like United Continental Holdings (UAL - Free Report) , Delta Air Lines, Inc. (DAL - Free Report) , Southwest Airlines Co. (LUV - Free Report) and GOL Linhas Aereas Inteligentes S.A. (GOL - Free Report) unveiled their respective traffic reports during the week.

While Latin American carrier GOL Linhas reported an increase in load factor (percentage of seats filled with passengers) as traffic growth outpaced capacity expansion, this key metric declined at its U.S. counterparts — Delta, United Continental and Southwest — due to capacity overexpansion.

Another downside over the past five trading days was the decline in the stock price of Hawaiian Holdings, Inc. (HA - Free Report) , the parent company of Hawaiian Airlines. Shares of the company declined on fears of intensifying competition in Hawaii as Southwest Airlines unveiled a detailed plan to offer flights connecting Hawaii and California. Subsequently, the Dallas-based carrier intends to offer inter-island flights, which will be a bigger blow to Hawaiian Airlines.

American Airlines Group Inc. (AAL - Free Report) also dominated headlines by virtue of its decision to discontinue flights connecting Chicago’s O’Hare International Airport and Beijing, from October this year.  Lack of profitability on the route led to the carrier’s decision.

Transportation - Airline Industry 5YR % Return

 

Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for May 2, 2018).

Recap of the Past Week’s Most Important Stories

1. At Delta, consolidated traffic, measured in revenue passenger miles (RPMs), came in at 18.26 billion, up 3.7% year over year. Consolidated capacity (or available seat miles/ASMs) climbed 4% to 21.45 billion on a year-over-year basis. Additionally, the carrier recorded an on-time performance (mainline) of 86.4% and completion factor (mainline) of 99.7% for April. Approximately, 15.9 million passengers flew on Delta during the period (Read more: Delta's April Traffic Increases, Load Factor Down).

2. April traffic growth (5.1%) was outpaced by capacity expansion (6.1%) at United Airlines as well. Consequently, load factor declined 80 basis points to 82.3%. The company posted an on-time performance of 73% and a completion factor of 99.8% for the month.

3. American Airlines introduced several other routes, apart from deciding to terminate its Chicago-Beijing service. In a customer-friendly move, the company announced the launch of multiple new flights (seasonal as well as year-round) to the Caribbean and Hawaii. For example, the carrier intends to start seasonal service from Chicago to Honolulu, which will run through the annual spring break season (Read more: American Airlines to Pull the Plug on Chicago-Beijing Service).

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. Load factor fell at Hawaiian Airlines as traffic growth (7.1%) was outpaced by capacity expansion (7.3%). However, passenger count increased 6.3% at the carrier in April. Passenger count of this Honolulu County, HI-based carrier may decline drastically in the event of Southwest Airlines entering Hawaii.

 5. At GOL Linhas, consolidated traffic, measured in revenue passenger kilometers (RPK), nudged up 1.9% to 2.76 billion. The metric rose 3% on the domestic front, while the international figure declined 7.2%.

On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) inched up 0.8% to 3.46 billion, primarily on the back of 1.3% growth in domestic capacity. The carrier further witnessed 3.5% increase in passenger count in April (Read more: Gol Linhas' Traffic & Load Factor Increase in April).

6. Southwest Airlines has been going through tough times lately. Late last month, the carrier gave a lackluster outlook for the second quarter due to weakness pertaining to bookings following a mid-air tragedy in one of its flights. Continuing the dismal trend, one of its flights was diverted during the week owing to a broken window.

Moreover, the carrier reported dismal traffic numbers for April. As expected, traffic for the month declined but capacity expanded. Consequently, load factor declined to the tune of 150 basis to 82.5% in the month.

Price Performance

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

Company

Past Week

Last 6 months

HA

-10.1%

11.4%

UAL

-0.3%

15.9%

GOL

-7.8%

11.6%

DAL

0.02%

6.5%

JBLU

-0.5%

2.2%

AAL

1.8%

-6.1%

SAVE

2.9%

5.2%

LUV

0.2%

-2.1%

CPA

-1.3%

-6.5%

ALK

-2.8%

-1.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that majority of the airline stocks traded in the red over the past week leading to the NYSE ARCA Airline Index declining 1.7% in the period. However, the gains were muted in nature. Shares of Hawaiian Holdings have declined the most (10.1%) owing to fears of competition intensifying in Hawaii, in the event of Southwest Airlines entering the market.

Over the course of six months, the NYSE ARCA Airline Index appreciated 3.5% on the back of double-digit gains at the likes of GOL Linhas.

What's Next in the Airline Space?

We expect April traffic reports from the likes of JetBlue Airways Corporation (JBLU - Free Report) in the coming days.

 

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