Thursday, December 3

Airline Stock Roundup: UAL’s Expansion Update, GOL’s August Traffic Report & More

In the past week, United Airlines UAL announced that due to the uptick in air-travel demand, it plans to increase its October flying schedule to 40% of its full schedule from 34% in September. Taking advantage of this improvement in travel demand (particularly for leisure), Spirit Airlines SAVE too issued an expansion update.

Meanwhile, Hawaiian Airlines, the wholly-owned subsidiary of Hawaiian Holdings HA, became the latest carrier to eliminate change fees. Notably, carriers like United Airlines, Delta Air Lines DAL and American Airlines AAL had earlier taken the same decision as mentioned in the previous week’s write-up.

Moreover, Gol Linhas GOL management stated that demand in the domestic market for August increased 19.8% from the July levels on the recovery in demand in the Latin American market.

Recap of the Past Week’s Most Important Stories

  1. United Airlines anticipates flying 46% of its October 2019 domestic schedule, higher than the September flying schedule of 38%. This includes restarting new services on approximately 50 routes. On the international front, United Airlines expects to fly 33% of its October 2019 schedule compared with 29% of the year-ago flying roster September. This includes resumption of services to 14 international destinations.

In another development, United Airlines announced that it will have to furlough roughly 16,370 employees as the existing federal grant of $25 billion covering the current payroll costs of airlines is set to expire at this month-end. If materialized, this drastic move will result in massive job loses across all work groups. Per a Reuters report, 2,850 pilots, 2,010 mechanics and 6,920 flight attendants alongside multiple management and support staff might be ousted between Oct 1 and Nov 30.

2 Hawaiian Airlines eliminated change fees on its flights beginning Sep 3. The strategic action is intended to attract passengers on board as the ongoing pandemic dealt a heavy blow to the airline’s top line due to deflated passenger revenues stemming from feeble air-travel demand. The cancellation of change fees implies that passengers can reschedule their domestic and international flights without incurring additional costs.

  1. Spirit Airlines aims to add routes to Las Vegas and Oakland from John Wayne Airport (SNA) in Orange County, CA. The carrier will operate the new daily nonstop flights from Nov 17, 2020. Its arrival at John Wayne facilitates one-stop access to cities across the country. The carrier will operate two daily flights from SNA to the Oakland International Airport in addition to daily flights to Las Vegas McCarran International Airport. The flight to Las Vegas comes with a package of convenient connections to another 15 major U.S. cities.

  2. Gol Linhas’ August traffic, measured in revenue passenger kilometers, plunged 71.8% year over year. With travel demand stooping below the year-ago levels, the company reduced capacity significantly. For August, capacity measured in available seat miles slumped 70.7%. With traffic declining more than the degree of capacity contraction, load factor (% of seats filled by passengers) fell to 79.4% from 82.4% a year ago. Gol Linhas did not operate any international flight last month.

  3. Ryanair Holdings RYAAY, currently carrying a Zacks Rank #3 (Hold), reported a 53% year-over-year drop in August traffic to merely 7 million guests. Ryanair operated approximately 60% of the normal August schedule with a load factor of 73%. On a rolling-annual basis, total traffic at Ryanair (including the LaudaMotion unit) declined 40% to 88.9 million.

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

Performance

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

The table above shows that all airline stocks have traded in the green over the past week leading the NYSE ARCA Airline Index to rise marginally to $60.77 in the week shortened by the holiday for Labor Day. Positive updates pertaining to the development of a coronavirus vaccine contributed to the stock value appreciation. However, during the the course of the past six months, the NYSE ARCA Airline Index has depreciated 26.8%.

What’s Next in the Airline Space?

Investors will look forward to the updates on a second round of federal financial aid for the airlines.

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Source: Nasdaq

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