In the past week, American Airlines Group Inc. (AAL - Free Report) and Delta Air Lines, Inc. (DAL - Free Report) joined United Continental Holdings, Inc. (UAL - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) in increasing fees for checked bags. Apart from the update on baggage fees, Delta was also in news due to a computer glitch, which affected its domestic operations on Sep 25. The problem has now been resolved.
Meanwhile, the labor unrest at low-cost carrier Ryanair Holdings plc (RYAAY - Free Report) intensified as pilots in Germany expressed their intention to join the Sep 28 strike across several European nations. The imminent strike prompted Ryanair to cancel approximately 150 flights of the scheduled 2,400, affecting multiple customers.
On the price front, the NYSE ARCA Airline Index declined 1.7% over the past week as oil prices escalated.
(Read the last Airline Stock Roundup for Sep 19, 2018)
Recap of the Past Week’s Most Important Stories
1. In a bid to counter the challenges posed by escalating fuel costs, Delta hiked its first checked bag fee to $30 from the previous $25, and the second checked bag fee to $40 from $35 initially on domestic routes. Earlier in April, the carrier started charging $60 for the first checked bag from basic-economy class passengers travelling to and from Europe.
Although the hour-long computer glitch at Delta has been resolved, the carrier’s record with respect to such disruptions has been disappointing. The company had encountered similar issues in 2017 and 2016 as well. In fact, technical glitches have been massive impediments for companies in the airline space. Since airlines spend a lot on technological infrastructure, their profitability might be hurt in the event of any such malfunctions.
Delta carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
2. American Airlines raised its checked bag fee by $5 each for both the first and the second bags. Per the renewed fee structure, passengers will have to pay $30 for the first checked bag fee and $40 for the second. The revamped fee policy is applicable on domestic routes, Puerto Rico, the US Virgin Islands and the Caribbean with immediate effect. However, certain privileged members will continue to enjoy free baggage checking (read more: American Airlines Now Jumps on the Bag Fee Hike Bandwagon).
3. In a bid to expand further, Spirit Airlines, Inc. (SAVE - Free Report) has decided to operate nonstop flights connecting Jacksonville International Airport to Chicago O’Hare International Airport and Detroit Metro Airport. The new flights will start operating from Dec 20, 2018. Once operational, Jacksonville will become the 69th destination for this Miramar, FL-based ultra low-cost carrier (read more: Spirit Airlines to Strengthen its Base in Florida).
4. Ryanair is expected to face another strike by cabin crew across Spain, Belgium, Holland, Portugal, Italy and Germany. In this regard, the unions representing the respective countries’ cabin crew have sent a joint letter to the company, threatening to start the largest ever protest at month-end in case it does not improve work environment. Per the company’s chief marketing officer Kenny Jacobs, these back-to-back strikes, especially at a time of soaring crude oil prices, are hampering Ryanair’s business and resulting in soft bookings (read more: Ryanair Cancels Flights as Cabin Crew Strike Date Approaches).
5. The U.S. Congress withdrew its plans to reauthorize the Federal Aviation Administration to regulate airlines’ current fee structure pertaining to baggage and ticket change prices. However, it has included certain rules promoting passengers’ interest. Some directives include setting a specific dimension for passenger seats with sufficient legroom and width as well as forbidding airlines from offloading passengers from flights after clearing the boarding gate.
The following table shows the price movement of the major airline players over the last week and during the past six months.
The table above shows that most airline stocks traded in the red over the last week, leading to decline in the NYSE ARCA Airline Index. Shares of Alaska Airlines Group, Inc. (ALK - Free Report) decreased the most during the period. Over the course of six months, the sector tracker declined 6.5% on multiple headwinds due to high fuel costs. Shares of Latin American carriers, Copa Holdings and GOL Linhas, shed the maximum value during the period.
What's Next in the Airline Space?
Investors will look forward to JetBlue’s Investor Day on Oct 2. September traffic reports from the likes of Delta are also expected in the coming days.
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