Markets

Airline Stock Roundup: Southwest Airlines to Hike Dividend, EgyptAir Tragedy Hits Industry

Dice with pencil on graph paper

The past week saw the Dallas-based carrier Southwest Airlines LUV announce two shareholder friendly moves - a dividend hike and a new share repurchase program. However, the recent crash of the EgyptAir jet into the Mediterranean Sea, claiming 66 lives, has been dominating headlines.

Furthermore, the employment data released by Bureau of Transportation Statistics for passenger airlines showed a substantial year-over-year increase in full-time equivalent (FTE) employment for March. Moreover, expansion related news from Alaska Air Group ALK grabbed headlines in the past week.

On the earnings front, European low-cost carrier Ryanair Holdings plc RYAAY reported healthy results in fiscal 2016 (ended Mar 31, 2016), on the back of increased revenues and low costs.

(Read the last Airline Stock Roundup for May 18, 2016 ).

Recap of the Past Week's Most Important Stories

1. Close on the heels of Delta Air Lines' DAL decision to hike its quarterly dividend payout, Southwest Airlines announced a dividend raise along with a new share repurchase program worth $2 billion. The low-cost carrier raised its cash quarterly dividend to $0.10 per share ($0.40 per share annualized), representing an increase of 33.33% over the previous quarterly payout (read more: Southwest Airlines Up on Dividend Hike & New Buyback Plan ).

2. Investigations are underway to determine the cause of the crash of the EgyptAir jet which was travelling from Paris to Cairo. According to a Bloomberg report, Egypt's aviation minister Sherif Fathy had cited terrorism as a probable cause behind the tragedy. Although it has not yet been proved conclusively that the flight was a victim to a terror act, we believe that in the event of it being proved so, travel to Europe will take a hit (read more: US Carriers Sell Off in Wake of EgyptAir Tragedy ).

3. Alaska Airlines, the wholly owned subsidiary of Alaska Air Group, announced the addition of a three-times-a-day nonstop service connecting San Diego to Sacramento and Burbank to San Jose. The new service is set to commence on Mar 16, 2017 (read more: Alaska Airlines Eyes Route Expansion, California in Focus ).

4. According to data released by the Bureau of Transportation Statistics, there was a 3.9% increase in the number of workers employed by U.S. scheduled passenger airlines for March. This marked the 28th consecutive month of year-over-year increase. FTEs for Mar 2016 came in at 406,113. According to the update, the most number of FTEs in the month were employed by the American Airlines Group AAL among the network airlines. Southwest Airlines secured the top spot in this regard in the low-cost carrier category.

5. Ryanair Holdings reported robust financial and operating numbers with net profit for fiscal 2016 up 43% year over year at €1,242 million. Moreover, load factor increased 500 basis points to 93%. The top line expanded 16% to €6,536 million on the back of an 18% rise in passenger count to 106.4 million. The customer friendly "Always Getting Better (AGB)" program drew massive number of new customers to Ryanair. However, the carrier issued a "cautious" outlook for fiscal 2017 in the wake of the recent terror attacks. The carrier expects airfares to face pressure due to concerns which could hurt travel demand in Europe. That the carrier's fears are not baseless is reflected by the update coming from travel company, Thomas Cook. The agency has revealed a 5% decline in summer bookings compared to last year. With average fares expected to decline approximately 7%, net profit for fiscal 2017 is expected to increase only 13%. The company plans to fly 116 million passengers in fiscal 2017, reflecting an increase of 9%.

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 1.08% 15.33%
UAL -0.13% -19.98%
GOL -9.83% -20.23%
DAL -0.09% -6.91%
JBLU -0.88% -27.95%
AAL -1.44% -22.17%
SAVE 1.88% 18.41%
LUV 1.40% -6.71%
VA 1.07% 56.49%
ALK 2.19% -16.00%

The table shows that airline stocks exhibited a mixed trend over the past week, leading to the NYSE ARCA Airline index remaining almost flat at $84.48 over the past 5 trading days. Shares of GOL Linhas GOL depreciated the most (9.83%) while Alaska Air Group emerged as the biggest gainer (2.19%) as investors seemed to be pleased with its expansion plans.

Over the past six months too, most airline stocks lost value with the NYSE ARCA Airline index declining 6.36%. Shares of Virgin America appreciated the most (56.49%) during the period while JetBlue Airways JBLU emerged as the biggest laggard (27.95%).

What's Next in the Airline Space?

Investors will keenly watch presentations by airline heavyweights in the coming days. Information on the EgyptAir crash will also be keenly awaited.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SOUTHWEST AIR (LUV): Free Stock Analysis Report

RYANAIR HLDGS (RYAAY): Free Stock Analysis Report

JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report

GOL LINHAS-ADR (GOL): Free Stock Analysis Report

DELTA AIR LINES (DAL): Free Stock Analysis Report

ALASKA AIR GRP (ALK): Free Stock Analysis Report

AMER AIRLINES (AAL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

RYAAY LUV GOL JBLU DAL

Other Topics

Stocks