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Airline Stock Roundup: AAL to be Compensated by BA, ALK's New CFO & More

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In the past week, American Airlines (AAL - Free Report) , with 24 Boeing 737 MAX jets in its fleet, inked a deal with the manufacturer of the planes — The Boeing Company (BA - Free Report) — pertaining to compensation for losses due to the grounding of the planes since March 2019. American Airlines aims to share part of the compensation with its workers under the company’s profit-sharing scheme.

Alaska Air Group (ALK - Free Report) — the parent company of Alaska Airlines — also featured in the headlines when its long-serving chief financial officer (CFO) Brandon Pedersen announced his intention to retire on Mar 2, 2020. Pedersen was the company’s outside auditor for 11 years prior to joining it in 2003 as the vice president of finance and controller. He was promoted to his current position in May 2010.

Meanwhile, Latin American carrier, Azul (AZUL - Free Report) and European carrier Ryanair Holdings (RYAAY - Free Report) reported year-over-year increase in their respective traffic numbers for December mainly backed by strong demand for air travel. Furthermore, United Airlines (UAL - Free Report) announced that it will not operate flights connecting the Dayton International Airport and George Bush Intercontinental Airport in Houston, TX.

(Read the last Airline Stock Roundup here)

Recap of the Past Week’s Most Important Stories

1. American Airlines, which expects the Boeing 737 MAX jets in its fleet to be grounded through Apr 7, 2020, will reportedly share $30 million of the compensation it would receive from Boeing, with employees. The payment is likely to be made this March, under its profit-sharing scheme. Notably, American Airlines is not the only U.S.-based carrier which will receive compensation from Boeing due to losses related to the Max grounding. Southwest Airlines (LUV - Free Report) , which enjoys the largest exposure to Boeing 737 MAX jets among U.S. carriers with 34 such jets in its fleet, also inked a deal with the plane manufacturer last month for partial compensation for losses due to the groundings. However, details of the deal remain undisclosed. Some other 737 MAX customers, including Turkish Airlines, too have signed deals with Boeing seeking compensation for losses.

2. During Pedersen’s tenure as CFO, Alaska Air Group acquired Virgin America, thereby expanding its presence significantly, particularly on the West Coast. Pederson will be replaced by Shane Tackett, who currently serves as the company’s executive vice president of planning and strategy. Tackett has served Alaska Air Group in multiple capacities ever since joining it in 2000. (Read more: Alaska Air Group Picks New CFO, Incumbent to Retire).

3. At Ryanair, December traffic (including 0.5 million from its LaudaMotion unit in Austria) was up 9% year over year to 11.2 million. However, load factor (% of seats filled with passengers) remained unaltered at 95%. Moreover, the company’s CEO Michael O'Leary reportedly stated that the carrier is unlikely to receive its first 737 MAX delivery from Boeing before October 2020. (Read more: Ryanair's December Traffic Rises 9% Amid 737 MAX Uncertainty).

4. At Azul, consolidated traffic (measured in revenue passenger kilometers) increased 27.2% year over year to 2.96 billion, owing to 25.7% growth on the domestic front and 31.1% rise, internationally. On a year-over-year basis, consolidated capacity (measured in available seat kilometers/ASKs) expanded 26.5% to 3.54 billion, driven by a 24.3% expansion in domestic capacity and a 32.8% increase in international capacity. (Read more: Azul's Traffic & Load Factor Increase in December).

5. Due to lacklusterdemand on the Dayton-Houston route, United Airlines has decided to discontinue operations on the same from Mar 29, 2020. Notably, the carrier has been operating non-stop flights on the route from June 2018. Nevertheless, United Airlines will continue to serve Dayton from its hubs in Chicago, Denver and Washington, DC. (Read more: United Airlines to Cease Dayton-George Bush Airport Service).

6.According to a report released by the U.K.-based aviation data firm — OAG — Delta Air Lines (DAL - Free Report) has emerged as the most punctual among leading U.S. carriers in 2019. Per OAG’s annual Punctuality League report, the on-time performance rating of this Atlanta, GA-based Zacks Rank #2 (Buy) carrier was 83.56% over the past 12 months. (Read more: Delta Most Punctual in 2019 Among Leading U.S. Carriers).

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

Price Performance

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

The table above shows that majority of the airline stocks traded in the red over the past week, due to the flaring up of oil prices following the U.S. drone strike near the Baghdad international airport that killed Iran’s top commander General Qassim Soleimani. Consequently, the NYSE ARCA Airline Index declined 3.2% over the past week. Over the course of six months, the sector tracker has decreased 2.1%.

 

What's Next in the Airline Space?

Delta is scheduled to release its fourth-quarter 2019 earnings report on Jan 14, thereby kickstarting the airlines earnings season.

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