Airline Stock Roundup: AAL to Apply for Coronavirus-Induced Aid, LUV in Focus

In the past week, American Airlines AAL dominated headlines by virtue of its decision to apply for the $12-billionworth coronavirus-led government stimulus package that it is eligible for. Through this move, the airline aims to protect jobs and pay packets for the next six months.

In another coronavirus-related development, Spirit Airlines SAVE cancelled flights to several states in response to the warning issued by the Centers for Disease Control and Prevention (CDC) against non-essential travel.

Moreover, Southwest Airlines LUV decided to trim its May capacity by more than 40% in the May 3-Jun 5 period to combat the extremely bleak air-travel demand scenario. Due to the coronavirus-induced turbulence in the airline space, updates pertaining to capacity cuts were also available in the previous week.

Recap of the Past Week’s Most Important Stories

In a bid to bolster its financial position in the face of the coronavirus-triggered dwindling air-travel demand, American Airlines decided to apply for the government bailout relief. The $2-trillion relief package (comprising $50 billion for passenger airlines) was legalized by President Donald Trump on Mar 27 after being passed by the Senate and the House of Representatives.Of the total amount thatthe Zacks Rank #3 (Hold) American Airlines is eligible for, asum of $6 billion will be received via loans and the remaining through payroll grants. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. Per its plan to trim capacity from May 3 onward, Southwest Airlines will operate 2,000 flights a day, down 1,700 from its normal frequency. Apart from schedule reduction, this low-cost carrier is condensing the time period for its operations by removing most departures before 7 a.m. and after 8 p.m.

With air-travel demand dwindling, airlines are looking to offer cargo charter services on passenger planes to augment theirtop lines. Southwest Airlines became the latest carrier to follow suit. Management at Southwest Airlines stated that it will offer cargo-only flights on a charter basisfor the first time in its history. The Dallas, TX-based low-fare airline will carry the freight in the bellies of its Boeing 737 aircraft.

3. Paying heed to travel-related public warningsin the wake of the coronavirus pandemic, Spirit Airlines will cancel all flights to and from New York, Connecticut and New Jersey. The flight suspensions are effective until at least May 4.With uncertainty looming over the extent of duration of the viral outbreak and its subsequent effect on air-travel demand, the airline suspended its first-quarter and 2020 guidance.

4. With the CDC advising the residents of New York, New Jersey and Connecticut not to indulge in non-essential domestic travel for two weeks, JetBlue Airways JBLU decided to reduce its daily quota of 200 flights in the NY area to 40.Meanwhile, the company CEO Robin Hayes joined other airlines in praising the U.S. administration for swiftly passing and enacting the Coronavirus Aid, Relief and Economic Security (CARES) Act.

5. In a bid to keep the supply chain of medical requirements like surgical masks, gloves, gowns and other protective equipment operative between the United States and China, Delta Air Lines DAL launched cargo-only flights on the Shanghai-Detroit route. The carrier is using a fuel-efficient Airbus A350-900 aircraft (a widebody jet) to ply on the route. Theaircraft has the capacity to carry 49 tons of cargo in its hold. On arrival of the cargo in Detroit, it will be transferred to domestic passenger flights for being shipped to various destinations in the United States.

Performance

The following table shows the price movement of the major airline players over the past week and during the past 6 months.

The table above shows that all airline stocks traded in the red over the past week, resulting in the NYSE ARCA Airline index declining 16.6% to $40.09. Diminishing air-travel demand due to the coronavirus pandemic resulted in the stocks losing value. Over the course of the past six months, the NYSE ARCA Airline Index has depreciated 59.6%.

 

What’s Next in the Airline Space?

Further corona virus-related updates and its resultant impact on air travel will be awaited by investors.

 

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Southwest Airlines Co. (LUV): Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU): Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
 
American Airlines Group Inc. (AAL): Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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