Airline Stock Roundup: UAL to Resume Shanghai Flights, Job-Cut Updates & More

In the past week, United Airlines UAL announced its decision to re-start nonstop services to China later this month through flights connecting San Francisco and Shanghai. Meanwhile, with the $25-billion federal aid having expired on Sep 30 and a second round of stimulus not yet approved despite positive signals to that end, United Airlines laid off around 13,000 employees.

American Airlines AAL also went ahead with its earlier decision to retrench 19,000 employees following the expiry of the pandemic package deadline. However, on a positive note, CEOs of both above-mentioned carriers hinted at the possibility of recalling the departed employees if a second round of fiscal stimulus gets approved in the coming days.

Meanwhile, JetBlue Airways JBLU was in news by virtue of its decision to avail of loans up to $1.14 billion from the United States Department of the Treasury. Also, American Airlines opted for this facility and is eligible to borrow up to $5.5 billion from the Treasury as mentioned in the previous week’s write-up.

Notably, European carrier Ryanair Holdings RYAAY grabbed headlines by virtue of the update that it is currently negotiating with the plane manufacturer Boeing on its current order of up to 210 Boeing 737 MAX planes, per a Reuters report.

Synopsis of the Past Week’s Top Stories

1.   United Airlines, currently carrying a Zacks Rank #4 (Sell), aims to resume nonstop services on the San Francisco-Shanghai route beginning Oct 21, 2020. The carrier will utilize the Boeing 777-300ER aircraft to serve this route on Wednesdays, Fridays, Saturdays and Sundays. Passengers will be able to return to San Francisco from Shanghai on Mondays, Tuesdays, Fridays and Sundays.

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

2.  With demand for leisure travel improving, Spirit Airlines SAVE decided to broaden its network by restarting operations to the Haitian city of Cap-Haitien. Services on the Cap-Haitien-Fort Lauderdale route are scheduled to be resumed thrice a week on Dec 3, 2020.

By recommencing non-stop flights to this favorite tourist spot of Haiti, Spirit Airlines aims to take advantage of the impending winter holiday season.  Additional traffic on the route will boost revenues for the airline, which like other carriers is suffering coronavirus-induced revenue weakness. Notably, the flights will connect Cap-Haitien to 22 major cities in the United States

3.   American Airlines and United Airlines removed around 32,000 employees in all following the termination of the Payroll Support Program for the airline industry. However, Southwest Airlines’ LUV CEO Gary C. Kelly reiterated that there will be no involuntary salary reductions or headcount cut through 2020-end. He stated that the carrier is looking at employee pay cuts to avoid furloughs. As part of the company’s various cost-cutting efforts, the CEO, who is already on a slashed remuneration, will forego his entire salary through the end of next year.

4.  In a bid to bolster its liquidity position in the face of a tepid travel-demand scenario, JetBlue Airways signed a loan and guarantee agreement with the United States Department of the Treasury under the CARES Act. Notably, JetBlue already borrowed $115 million of the eligible amount. The carrier now has the option to borrow further through Mar 26, 2021. In connection with the loan contract, this low-cost carrier inked a warrant deal with the Treasury.

5.  Due to the coronavirus-induced lackluster performance of carriers in the Northern Hemisphere during summer, International Air Transport Association (IATA) issued a downbeat current-year airline traffic forecast. Per IATA, global air traffic is expected to plummet 66% in 2020 from its 2019-levels. The previous projection had hinted at a 63% year-over-year plunge. Such a dismal prediction reflects a weaker-than-expected recovery in air-travel demand.


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, courtesy of the bullish comments from House Speaker Nancy Pelosi regarding an additional federal help for the airlines. As a result, the NYSE ARCA Airline Index has appreciated 4.1% to $57.74. Moreover, during the course of the past six months, the NYSE ARCA Airline Index has surged 44.6% owing to impressive gains at the likes of Gol Linhas GOL, Spirit Airlines and United Airlines.

What’s Next in the Airline Space?

Considering that another stimulus package for the airlines may be a possibility, as hinted by Pelosi, investors will look forward to the updates on the same.

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Southwest Airlines Co. (LUV): Free Stock Analysis Report
JetBlue Airways Corporation (JBLU): Free Stock Analysis Report
Ryanair Holdings PLC (RYAAY): Free Stock Analysis Report
Gol Linhas Aereas Inteligentes S.A. (GOL): Free Stock Analysis Report
United Airlines Holdings Inc (UAL): 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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