Airline Stock Roundup: Sinking Fuel Costs Support Carriers, Hawaiian Holdings Gains Among Others

It has been a good time for the airline industry with quite a few significant players like Hawaiian Holdings Inc. (HA), Spirit Airlines, Inc. (SAVE), Southwest Airlines Co. (LUV), Delta Air Lines, Inc. (DAL) and JetBlue Airways, Inc. (JBLU) witnessing northward movements in their share prices, over the last five trading days, owing to plunging fuel costs. Fuel costs account for a major chunk of an airline's operating costs.

Strong earnings reports from major players helped airline stocks to bounce back impressively after being battered in September and early October due to Ebola related worries (See the last ‘Airline Stock Roundup’ here: Airline Stock Roundup: Earnings Beats from Alaska Air, United Continental, Southwest, Spirit Airlines Lift Stocks despite Ebola). Falling oil prices helped check fears pertaining to the recent Ebola outbreak and enabled the stocks to maintain their upward momentum.

Recap of Most Important Stories of the Last Five Trading Days

1. American Airlines Group Inc. (AAL) announced that it intends to integrate the US Airways Dividend Miles frequent flyer plan with its existing AAdvantage loyalty program in the second quarter of 2015. The integration will allow US Airways Dividend Miles club members to enjoy attractive perks associated with the AAdvantage loyalty program (read more: American Airlines to Club Dividend Miles, AAdvantage Plans). In addition, American Airlines also announced its decision to start daily flights from Miami to Frankfurt effective May 14, 2015.

2. Domestic operator Southwest Airlines announced that it has successfully expanded its reach with the launch of nonstop services between Dallas Love Field and eight more cities in the U.S. Following the expiration of the Wright Amendment last month, Southwest Airlines has been working toward the expansion of its services. The carrier, which had purchased AirTran Airways in 2011, also said that it has almost completed the integration process by expanding its international operations (read more: Southwest Expands Services, AirTran Integration Nearly Over).

3. In an attempt to enhance its business opportunities and improve customer services further, Delta Air Lines announced its plans to expand its customer Porsche service to three more airports by Nov 30, 2014. The expansion of the transfer service will enable high value clients of the carrier to be transferred in Porsche vehicles from gate-to-gate on the tarmac (read more: Delta (DAL) to Expand Porsche Service to 3 More Airports).

Shares of Delta Air Lines were also positively impacted when it released strong traffic results for the month of October. Consolidated passenger unit revenue (:PRASM) for the month climbed 3% year over year. Improvements in domestic and transatlantic unit revenues led to the increase. Operating performance was also impressive h with a monthly completion factor of 99.9% and an on-time arrival rate of 86.8%.

4. Another important event witnessed in the air line space was the announcement by Germany’s Deutsche Lufthansa Aktiengesellschaft to reduce its 2015 profit forecast egged by concerns of a downturn affecting the global economy next year. The airline now expects 2015 operating profits to be significantly above 2014 forecasted operating profits of around €1 billion. Operating profits for 2015 were previously projected at €2 billion.

This is the second time in the span of a few months that the guidance has been revised downward. Shares of the company, one of Europe’s biggest airlines, thus fell significantly on the news. Moreover, the airline has been witnessing strikes by pilots over cost cuts.

5. Alaska Air Group reported impressive operational results for October 2014. The company reported 10% growth in its October traffic on a 10.9% increase in capacity compared to the year-ago period. However, the company reported a drop in its load factor by 70 basis points (bps) to 83%.

Performance

The following table shows the price movements of the major airline players over the past 5 trading days and during the last 6 months:

Over the past five trading sessions, Hawaiian Holdings was the biggest gainer among the major players in the airline industry, with its share price increasing 13.48%. Meanwhile, Southwest Airlines has witnessed the highest upside (50.16%) over the last six months.

What’s Next in the Airline Biz?

Moreover, the earnings report of GOL Linhas A (GOL), the largest low-cost and best-fare airline in Latin America, on Nov 11 is another awaited event in the sector. In general, we expect airline stocks to continue flying high over the next week.

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