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Airline Stock Roundup: Delta Q4 PRASM View Upbeat, US Aviation Treaties with Mexico & Cuba in Focus

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The past week was a significant one for the airline industry. Key aviation treaties were inked by the United States with Cuba and Mexico. The deal with Cuba, inked a year after President Obama had called for the restoration of diplomatic ties with the island, has opened roads for 110 scheduled flights to fly to Cuba on a daily basis.

Diplomatic ties between the two countries had been severed by the U.S. in 1961. The air treaty with Mexico is designed to remove the restrictions on the two countries, existing as per the current deal. The liberalized deal, once effective, will allow freedom to the carriers to operate on any route (with limitless frequency) of their choice between Mexico and the U.S.

Apart from the aviation treaties, Delta Air Lines' DAL bullish presentation at its investor day also grabbed headlines. Other eye-catching updates over the past week included November traffic data released by Latin-American carriers GOL Linhas Aereas Inteligentes S.A. GOL and Copa Holdings SA CPA , the parent company of Copa Airlines. Southwest Airlines LUV was also in news for a payment of $2.8 million that it will have to make against the settlement of a Federal Aviation Administration (FAA) lawsuit on maintenance issues.

Read the last Airline Stock Roundup for Dec 16, 2015 .

Recap of the Past Week's Most Important Stories

1. On Dec 18, the US Department of Transportation announced the signing of a new air transport deal between the U.S. and the Mexican government. The treaty, inked by the transportation ministers of both the countries, follows more than two years of negotiations on the issue. The liberalized deal, which has been welcomed by carriers like JetBlue Airways JBLU , United Continental Holdings UAL and American Airlines Group AAL , has already won approval from the U.S. government but needs to be ratified by the Mexican senate before it goes into effect. The U.S.-Mexico treaty comes close on the heels of the former's similar deal with Cuba (read more: Following Cuba, New Treaty to Open Up Mexico-US Air Routes? ).

2. Delta Air Lines unveiled a bullish forecast with respect to passenger revenue per available seat mile (PRASM, a measure of unit revenue) at its 2015 investor day presentation. The carrier now expects the key metric to decline approximately 2% in the final quarter of the year. The prior projection had pegged fourth quarter PRASM decline at the high end of the 2.5% to 4.5% range (read more: Delta Unveils Improved Q4 PRASM View at Investor Day ).

3. GOL Linhas witnessed a decline in air traffic in Nov 2015. Traffic stood at 2.89 billion, down 11% from 3.2 billion recorded a year ago. Adverse conditions in the Brazilian economy coupled with foreign currency headwinds largely resulted in the dismal performance (read more: GOL Linhas' November Traffic Declines 11%, Capacity Down ).

4. Copa Airlines posted an increase in air traffic for the month of November. Traffic came in at 1.3 billion, up 2.6% from 1.27 billion recorded in Nov 2014. On a year-over-year basis, consolidated capacity inched up 2.6% to 1.77 billion (read more: Copa Airlines November Traffic Gains on Favorable Factors ).

5. Southwest Airlines will have to shell out $2.8 million to settle a lawsuit that alleges violation of maintenance norms by the carrier. In the event of the carrier failing to implement the operational changes in the settlement deal, Southwest Airlines will pay a further $5.5 million in deferred civil penalties (read more: Southwest Airlines to Shell Out $2.8M for Fed Suit Settlement ).

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 -1.14% 53.88%
UAL 0.18% 5.02%
GOL -22.05% -76.10%
DAL 0.39% 20.07%
JBLU 2.67% 10.50%
AAL -0.94% 0.40%
SAVE -1.37% -35.22%
LUV -1.14% 25.91%
CPA 4.99% -31.46%
ALK -0.80% 22.85%

Over the course of last week, the NYSE ARCA Airline index declined 0.57% to $89.41. The worst performer was GOL Linhas whose stock shed 22.05% mainly due to the weak November traffic data.

Meanwhile, over the last 6 months, the NYSE ARCA Airline index lost 8.95% of its value. GOL Linhas was again the main laggard, as it witnessed a 76.10% price decline. On the other hand, Hawaiian Holdings emerged as the biggest beneficiary on the bourses with its shares advancing 53.88% during the period.

What's Next in the Airline Biz?

With nothing specific lined up, stay tuned for regular news updates in the final week of 2015. Focus will also remain on the movement of oil prices that are currently hovering below the $40 a barrel mark, having dropped to a fresh 7-year low earlier this week.

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SOUTHWEST AIR (LUV): 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

UNITED CONT HLD (UAL): Free Stock Analysis Report

COPA HLDGS SA-A (CPA): 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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