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Airline Stock Roundup: LUV Hawaii-Bound, U.S. Carriers Eye Haneda Airport Slots

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In the past week, Southwest Airlines (LUV - Free Report) trimmed its first-quarter projection for operating revenue per available seat mile (RASM: a key measure of unit revenues) due to the 35-day partial U.S. government shutdown. On an encouraging note, the carrier finally gained approval to fly to Hawaii. The government shutdown had delayed the approval process.

With the Olympics to be held in Tokyo next year, leading U.S. carriers like United Airlines — the wholly owned subsidiary of United Continental Holdings (UAL - Free Report) , Delta Air Lines (DAL - Free Report) and American Airlines (AAL - Free Report) are seeking approval from the U.S. Department of Transportation (DOT) to fly to Tokyo’s Haneda Airport. An update pertaining to JetBlue Airways’ (JBLU - Free Report) efforts to strengthen its Boston footprint was also available in the past week.

(Read the last Airline Stock Roundup for Feb 20, 2019)

Recap of the Past Week’s Most Important Stories

1. Southwest Airlines anticipates first-quarter 2019 revenues to be adversely impacted to the tune of $60 million due to the government shutdown. Previously, the airline predicted revenues to decline by $10-$15 million. As a result of weak bookings, the airline now forecasts RASM to increase in the range of 3-4% compared with a rise of 4-5% expected earlier. (Read more: Southwest Shares Decline on Dull Q1 Unit Revenue View).

Furthermore, Southwest Airlines took a major step toward fulfilling its 2019 growth plans when it received approval from the Federal Aviation Administration (FAA) to fly to the Hawaiian Islands. Tickets on the routes will be shortly available. Once the company commences operations to the islands, competition will heat up particularly for Hawaiian Airlines — the subsidiary of Hawaiian Holdings (HA - Free Report) . This is because it is dependent on the Hawaii market for generation of most of its revenues.

Southwest Airlines carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. United Airlines filed an application with the DOT to operate daily non-stop flights to Tokyo’s Haneda Airport from six U.S. international airports. In the summer of 2020, United Airlines plans to commence operations to Haneda after the slots are awarded from its hubs at Newark Liberty, Chicago O'Hare, Washington Dulles, Los Angeles International, Houston George Bush and Guam (read more: United Airlines Looking to Expand Operations to Haneda Airport).

3. In a bid to strengthen its presence in Boston, JetBlue announced that it will add more flights connecting Logan International Airport to its 12 existing routes, extending along the eastern half of the United States. Notably, JetBlue will start adding the flights that will operate on a daily basis from this summer.

Additionally, this low-cost carrier aims to start offering hourly service to two key northeast markets — Washington, D.C. and the New York Metro Area — from Boston in order to meet its target of 200 daily departures.

4. In a customer-friendly move, Alaska Airlines — the wholly owned subsidiary of Alaska Air Group (ALK - Free Report) — has decided to upgrade and expand facilities at the San Francisco International Airport (SFO) lounge. To this end, the carrier aims to build a new 8,500-square-foot top floor lounge at the airport. The new lounge is anticipated to start functioning next year and will be the first in terminal 2. The above decision is part of the carrier’s multi-year commitment to improve the lounge experience of travelers at SFO.

5. According to International Air Transport Association’s (IATA) 2018 safety-related data in the aviation space, rate for all accidents (accidents per 1 million flights) increased on a year-over-year basis. The rate for such accidents was 1.35 (one accident for every 740,000 flights) compared with 2017 figure of 1.11. The comparable figure for 2013-2017 period was 1.79. Moreover, the rate for major jet accidents (jet hull losses per 1 million flights) in 2018 was 0.19 (one major accident for every 5.4 million flights). The figure compared favorably with 0.29 recorded in the 2013-2017 period. The comparable figure was 0.12.

Additionally, in 2018 there were 11 fatal accidents with 523 fatalities related to passengers/ crew. In the 2013-2017 period, there was an average of 8.8 fatal accidents, with approximately 234 fatalities per year. In 2017, the industry experienced a record low of 6 fatal accidents, with 19 fatalities. Moreover, one accident in 2017 resulted in the deaths of 35 persons on the ground.

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

-7%

-30.2%

UAL

-2.5%

0.7%

GOL

0.6%

189.5%

DAL

-2.9%

-14.9%

JBLU

-2.4%

-11.6%

AAL

0.7%

-12.3%

SAVE

-2.6%

24.8%

LUV

0.9%

-11.8%

CPA

-2%

7.4%

ALK

-1.9%

-8.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that almost all airline stocks traded in the red over the past week leading to the NYSE ARCA Airline Index decreasing 2%. Over the course of six months, the sector tracker decreased 4.1%.

What's Next in the Airline Space?

With leading carriers scheduled to present at the 2019 J.P. Morgan Aviation, Transportation & Industrials Conference on Mar 5, investors will await updates from the same.

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