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Airline Stock Roundup: LUV's Troubles, ALK's Expansion Update & More

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In the past week, Southwest Airlines Co. (LUV - Free Report) was sued by some of the passengers aboard its ill-fated flight 1380 on Apr 17. We remind investors that a mid-air engine explosion on the Dallas-bound flight from New York had killed one passenger and injured many.

Alaska Airlines, the wholly-owned subsidiary of Alaska Air Group (ALK - Free Report) , also featured in the news during the week by virtue of its announcement to introduce flights connecting Sacramento and Kona. Meanwhile, Hawaiian Holdings’ (HA - Free Report) subsidiary, Hawaiian Airlines, continued with its expansion initiatives by announcing its intention to increase the frequency of its winter service between Sapporo and Honolulu.

Furthermore, Delta Air Lines, Inc. (DAL - Free Report) made its policy pertaining to emotional support animals on its flights stricter by announcing its decision to prohibit passengers from flying with pit bull type dogs. The tweaked policy, aimed at promoting passenger safety, will be effective from Jul 10, 2018.

Transportation - Airline Industry 5YR % Return

 

Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for Jun 20, 2018)

Recap of the Past Week’s Most Important Stories

1. Alaska Airlines announced a new non-stop service between Sacramento, CA and Kona on Hawaii's Big Island. The service is expected to be operational from Dec 20. Airplanes on this route will ply thrice weekly. Currently, the company operates non-stop flights from Sacramento to Maui, Hawaii. The additional service to Hawaii can be attributed to strong demand for travel to the region (read more: Alaska Air Arm to Add Flight Between Sacramento & Kona).

Alaska Air Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. Hawaiian Airlines announced that it will operate more flights on the Sapporo-Honolulu route in the Feb 1-16 time period, next year. The carrier currently operates non-stop flights between Sapporo’s New Chitose Airport and Honolulu’s Daniel K. Inouye International Airport thrice a week. The service will be expanded to up to five flights a week between the destinations in the above-mentioned period (read more: Hawaiian Holdings Arm to Boost Sapporo-Honolulu Connectivity).

3.The lawsuit filed in the Supreme Court of New York has accused Southwest Airlines of negligence in providing proper care to its passengers to the point of even risking their lives. Per the claim, Southwest has not made sufficient efforts to repair damaged aircraft and/or replace the unsafe ones for a safer travel (read more: Southwest Bumps Into New Trouble Due to Flight 1380 Incident).

4. Delta invited criticism from trainers and users of service dogs, following its decision to prevent a passenger from carrying more than one emotional support animal on a flight. Pit bull dogs will no longer be classified as support/service animals. The new rules, designed to take effect in a fortnight, are in addition to the existing rules on support animals, already effective from Mar 1.

On a separate note, Delta inked a deal with Bombardier to purchase 20 CRJ900 planes, in a bid to modernize its fleet. The new planes are expected to be delivered from late 2018 to 2020.

5. JetBlue Airways Corporation (JBLU - Free Report) plans to offer customers more options for travelling to Havana. To this end, the carrier has announced a new service from Boston to Havana. Simultaneously, it will add more flights on the existing route from Fort Lauderdale to Havana.

The airline will begin a Saturday service connecting Boston Logan International Airport with Havana’s Jose Marti International Airport from Nov 10, 2018 onward. Notably, JetBlue is the only U.S. airline to serve the Cuban capital from Boston.

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

-6%

-9.4%

UAL

-4.1%

5.8%

GOL

-11.1%

-37.3%

DAL

-5.1%

-9%

JBLU

-2.7%

-16.7%

AAL

-7.1%

-25.4%

SAVE

-8.2%

-20.9%

LUV

-1.6%

-22.4%

CPA

-5.1%

-30.1%

ALK

-4.1%

-18.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that all airline stocks traded in the red over the past week, following the spike in oil prices. Shares of Gol Linhas Aereas Inteligentes S.A. (GOL - Free Report) have declined the most (11.1%) in the period.

We note that the health of airline stocks is inversely proportional to oil prices. The rise in oil price was owing to OPEC’s plans (after intense negotiations in Vienna) for a smaller-than-expected output raise. Macro issues (trade war-related fears) have also been hurting the market over the past week.

Consequently, the NYSE ARCA Airline Index declined 4.7% in the period. Over the course of the last six months, the sector tracker has lost more than 14% of its value mainly due to high fuel costs and other headwinds. Gol Linhas again was the primary laggard with its shares declining 37.3%. Shares of fellow Latin American carrier, Copa Holdings S.A.’s (CPA - Free Report) , have also decreased 30.1% in the same period.

What's Next in the Airline Space?

Stay tuned for usual news updates in the space. Focus will also be on the movement of oil prices, following OPEC’s decision.

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