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Airline Stock Roundup: LUV's Labor Deal, DAL's June Traffic Report & More

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In the past week, Southwest Airlines Co. (LUV - Free Report) received good news on the labor front. The low-cost carrier inked a provisional labor deal with the Aircraft Mechanics Fraternal Association. Notably, the association represents 2,400 of its employees involved in the aircraft mechanics workgroup.

However, labor troubles continue at European low-cost carrier, Ryanair Holdings plc (RYAAY - Free Report) .  The airline pilots, based in Ireland, are scheduled to go on a 24-hour strike on Jul 12 in protest against management’s approach toward transfers between the carrier’s European and African bases. 

Meanwhile, June load factor (% of seats filled by passengers) at Delta Air Lines, Inc. (DAL - Free Report) remained flat at 88.5% as both traffic and capacity grew at 3% each, during the month. An expansion-related update from Hawaiian Holdings, Inc.’s (HA - Free Report) subsidiary, Hawaiian Airlines, also grabbed headlines over the past five trading days.

(Read the last Airline Stock Roundup for Jun 27, 2018)

Recap of the Past Week’s Most Important Stories

1. Apart from the tentative labor deal with its aircraft mechanics, Southwest Airlines, which is undergoing turbulence due to the Flight 1380 accident earlier this year, was in the news again when it extended its bookable schedule through Mar 6, 2019. As part of its domestic expansion initiatives, the low-cost carrier announced several additional non-stop services connecting North Texas with important cities across the United States. It will also increased frequency to the popular destinations from Dallas Love Field (read more: Southwest to Add Flights for Domestic Expansion).

2. While releasing its June traffic numbers, Delta stated that it still expects second-quarter earnings per share in the $1.65-$1.75 range. The Zacks Consensus Estimate for second-quarter earnings stands at $1.75 per share. Adjusted pre-tax margin is still anticipated in the band of 13-14% for the same period. Also, fuel price per gallon is projected to be between $2.20 and $2.25. System capacity is envisioned to expand approximately 3.5%. Additionally, total revenue per available seat mile is expected (TRASM) to increase between 4% and 5% year over year.

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

3. Hawaiian Airlines has announced a daily non-stop service between Sacramento, CA and Kahului, Maui. While flights between Kahului and Sacramento will start operating from Apr 1, 2019, the same between Sacramento and Kahului will begin the next day. Tickets are currently on sale with special introductory one-way fares (read more: Hawaiian Holdings Arm to Fly Sacramento-Kahului From 2019).

4. Ryanair’s pilots, represented by the Irish Airline Pilots' Association and directly employed by the company, will go on strike next Thursday against management inaction as far as their demands are concerned. The strike, if it materializes, might hamper travel plans of many passengers as Jul 12 marks the beginning of the traditional holiday fortnight in Northern Ireland. What is worse is that more strikes may follow if the labor unrest is not resolved.

5. Despite rising fuel costs, average air fares continue to drop in the United States. The metric declined 6.6% year over year in June mainly due to intense competition in key markets. Moreover, air fares in the country are projected to be down 9% year over year for travel on Jul 4, 2018. The figure of $171 round-trip is projected to be the lowest since Jul 4, 2013.  Although favorable for passengers, low air fares are a drag for airline companies.

Price Performance

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

Company

Past Week

Last 6 months

HA

-0.4%

-7.8%

UAL

1.2%

2.4%

GOL

4.5%

-44.8%

DAL

-2.2%

-12.8%

JBLU

1.1%

-10.6%

AAL

-1.3%

-28.3%

SAVE

4.7%

-15.1%

LUV

2.3%

-19.9%

CPA

3.6%

-28.6%

ALK

2.8%

-16.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that most airline stocks traded in the green over the last week leading to a 1.2% increase in the NYSE ARCA Airline Index. Over the course of six months, the sector tracker has decreased 14.6% due to multiple headwinds like rising fuel costs. Shares of GOL Linhas Aéreas Inteligentes S.A. (GOL - Free Report) have declined the most (44.8%) in the period.

What's Next in the Airline Space?

Investors will look forward to June traffic reports from the likes of United Continental Holdings, Inc. (UAL - Free Report) and Allegiant Travel Company (ALGT - Free Report) in the coming days.

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