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Airline Stock Roundup: Outage Hits Delta PRASM, 8 U.S. Carriers Havana-Bound

The past week saw Delta Air LinesDAL posting dismal traffic numbers for August. The power outage on Aug 8 disrupted operations of the carrier across the globe and hurt its top line for the month by $100 million.

Moreover, load factor (percentage of seats filled with passengers) slipped in the month as capacity expanded while traffic contracted, leading to empty planes. Alaska Air Group ALK also saw its August load factor declining as capacity expansion outweighed traffic growth.

Apart from traffic updates, the past week saw the U.S. Transportation Department (DOT) granting final approval to eight U.S.-based carriers to initiate commercial flights to the Cuban capital of Havana. Dallas-based low cost carrier, Southwest Airlines LUV , also featured in the news due to its tentative pay-related deal with maintenance technicians.

TRANSPORTATION-AIRLINE Industry Price Index

TRANSPORTATION-AIRLINE Industry Price Index

(Read the last Airline Stock Roundup for Aug 31, 2016 ).

Recap of the Past Week's Most Important Stories

1. Revenue passenger miles (RPMs: a measure of air traffic) at Delta slipped 2.8% to 20.22 billion in August. Average seat miles (ASMs: a measure of capacity) grew marginally to 23.95 billion. The airline behemoth witnessed a 9.5% decline in consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenue). The metric was mainly hurt by the power outage, which crippled operations and resulted in 2,300 flights being cancelled over three days (Read more: Delta Air Lines' August PRASM Hit by Power Outage ).

2. Carriers like United Continental Holdings UAL , Delta, American Airlines Group AAL and Spirit Airlines SAVE were granted the final approval by the U.S. DOT to fly to Havana. Following the final go-ahead, carriers will now be able to start operations from as early as this fall. The approval was granted on the same day that the first commercial flight to Cuba from the U.S. touched ground in more than 50 years. JetBlue JBLU had the honor of operating the flight (387) which landed in Santa Clara, Cuba, from Fort Lauderdale (Read more: 8 Airlines Gain Final DOT Approval to Fly to Havana ).

3. Close on the heels of the tentative deal inked with the union representing its pilots, Southwest Airlines entered into an "agreement in principle" with its facilities maintenance technicians. Upon ratification, the five-year long deal will ensure higher pay and better working conditions for the low-cost carrier's maintenance technicians (Read more: Southwest Inks Another Agreement-in-Principle ).

4. RPMs at Alaska Air Group climbed 9% on a year-over-year basis in Aug 2016. The company's traffic growth can be attributed to new routes and focus on enhancing customer service. ASMs were up 10.3% (Read more: Alaska Air Group August Traffic and Capacity Increase ).

5. Shares of the Indianapolis-based Republic Airways Holdings, the parent company of Republic Airlines and Shuttle America, gained significantly, following its deal with American Airlines Group. The deal enables the regional carrier to continue providing regional flights for the Fort Worth, TX-based carrier, which accounts for a significant portion of Republic Airways' top line. American Airlines, which is the regional carrier's largest customer, will receive $250 million as unsecured bankruptcy claim under the deal.

The news naturally found favor with investors at Republic Airways, as it has removed a major obstacle in the carrier's attempts to come out of bankruptcy. In Feb 2016, the regional carrier had sought bankruptcy protection .

Performance

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

Company Past Week Last 6 months
HA 2.71% 4.99%
UAL 7.23% -11.23%
GOL 14.79% 150.85%
DAL 0.77% -23.91%
JBLU 2.52% -25.71%
AAL 3.90% -12.27%
SAVE 1.58% -19.59%
LUV 1.04% -10.92%
VA -0.04% 84.80%
ALK 3.12% -10.62%

The table above shows that almost all airline stocks traded in the green over the past week, which was a day short on trading owing to the Labor Day holiday on Sep 5. The NYSE ARCA Airline index inched up 1.99% to $90.03 over the past week. Shares of GOL Linhas gained the most (14.79%).

Over the course of six months, the NYSE ARCA Airline index appreciated 2.04% driven by huge gains at GOL Linhas and Virgin America.

What's Next in the Airline Space?

We expect multiple August traffic reports in the coming days. Moreover, focus will remain on presentations by heavyweights like Delta Air Lines and American Airlines.

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SOUTHWEST AIR (LUV): Free Stock Analysis Report

JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report

DELTA AIR LINES (DAL): Free Stock Analysis Report

ALASKA AIR GRP (ALK): Free Stock Analysis Report

UNITED CONT HLD (UAL): Free Stock Analysis Report

SPIRIT AIRLINES (SAVE): Free Stock Analysis Report

AMER AIRLINES (AAL): 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.


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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