Airline Stock Roundup: Traffic Data for Southwest, American Airlines and United Continental Dominate Headlines

Over the past 5 trading days, major airline stocks continued their northward movement. Most of the carriers grossed attention during the period with their October traffic releases.

While companies like Southwest Airlines (LUV), Hawaiian Airlines came up with healthy rise in traffic, data released by other carriers such as United Continental Holdings Inc. (UAL) and American Airlines Group (AAL) was subdued. American Airlines was also in the headlines due to the rejection of the 5-year labor contract by its flight attendants.

There was not much activity on the earnings front with most companies having already reported their quarterly results. Brazilian airline Gol Linhas Aereas SA (GOL) was the sole major player in the field to report financial results during the last 5 trading days. The company performed disappointingly in the third quarter – reporting a wider than expected loss

Airline stocks have bounced back impressively after being battered in September and early October due to Ebola related worries aided by healthy earnings reports and falling oil prices (See the last ‘Airline Stock Roundup’ here: Sinking Fuel Costs Support Carriers, Hawaiian Holdings Gains Among Others).

Recap of Most Important Stories of the Last Five Trading Days

1. Hawaiian Airlines, a subsidiary of Hawaiian Holdings, Inc. (HA), transported 860,260 passengers in October, up 4.6% year over year. The airline was also awarded the highest rank among 16 largest national carriers, by the U.S. Department of Transportation (DOT.V), for on-time performance in the month of September. The carrier also received DOT’s top rank for punctuality (read more: Hawaiian Airlines Reveals Impressive October Traffic Data).

2. Flight attendants at American Airlines Group voted down a joint five-year labor contract, which would have covered approximately 24,000 stewards of American Airlines and U.S. Airways, by a narrow margin. The rejected tentative agreement covered guaranteed pay raises but did not include a profit-sharing plan. With the contract rejected, an arbitrator will now decide the terms of the new agreement. The first arbitration meeting is scheduled to be held on Dec 3, 2014 (read more: American Airlines Crew Votes Against 5-Year Labor Contract).

American Airlines also reported traffic data for October. Revenue per miles (RPMs) came in at 17.9 billion for the month, up 0.2% year over year. Capacity increased 0.5% to 21.8 billion. Load factor came in at 82.2%, down 0.3% from the year-ago figure. The company still projects the consolidated passenger revenue per available seat mile for the final quarter of 2014 to be approximately flat to up 2%.

3. Southwest Airlines revealed a healthy rise in October traffic aided by improved capacity. The company expects to increase capacity further by 6% in 2015. The stock gained buoyed by these positives. On the other hand, United Continental Holdingsshowed only a modest increase in its traffic numbers in the same month (read more: United Continental, Southwest Airlines October Traffic Rises).

4. GOL reported third-quarter 2014 net loss per share of approximately 14 cents, which compared unfavorably with the Zacks Consensus Estimate of a loss of 9 cents due to increased costs. The loss, however, narrowed from the year-ago loss of 31 cents per share. A decline in domestic supply hurt the quarterly numbers. Net revenue increased 10.4% year over year to R$2,461.7 million (approximately $960 million), missing the Zacks Consensus Estimate of $962 million by a small margin.

5. Airline behemoth Delta Air Lines Inc. (DAL) gained significantly following the agreement between the U.S. and China governments to extend the validity of short-term visas for visitors between both nations for up to ten years. The two countries have also jointly agreed on increasing the validity of student and exchange visas from one to five years. The above agreement with China is expected to give a significant boost to the U.S. economy, which in turn, should considerably benefit airline companies.

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, Southwest Airlines was the biggest gainer among the major players in the airline industry with its share price increasing 7.23%. The carrier has also witnessed the highest upside (57.86%) over the last six months.

What’s Next in the Airline Biz?

Apart from the usual releases this week, investors will look forward to the third quarter earnings release of Copa Holdings SA (CPA) on Nov 19. The investor day presentation of JetBlue Airways Corporation, also slated for the same day, is another event that should garner attention. In general, we expect airline stocks to continue flying high over the next week.

Better days are ahead for the U.S. airline industry with Airlines for America predicting a 1.5% increase in the number of flyers during the Thanksgiving holiday season this year. According to the forecast, U.S. airlines will transport 24.6 million passengers during the Nov 21–Dec 2 period. Nov 30, the Sunday after Thanksgiving, is expected to be the busiest flying day in the period under consideration.

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