Zacks Industry Outlook Highlights: Delta Air Lines, Alaska Air Group, American Airlines Group, United Continental Holdings and Southwest Airlines

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For Immediate Release

Chicago, IL - November 23, 2015 - Today, Zacks Equity Research discusses the Airlines, part 2, including Delta Air Lines, Inc. ( DAL ), Alaska Air Group ( ALK ), American Airlines Group ( AAL ), United Continental Holdings ( UAL ) and Southwest Airlines ( LUV ).

Industry: Airlines, part 2


The weakness in oil prices , which has lasted for well over a year now, is nothing short of a godsend for stocks in the airline space. Operating expenses of these companies have gone down considerably as fuel accounts for one of the major input costs for air carriers.

Oil prices have fluctuated wildly over the past few months. Currently, prices are hovering around the $45-a-barrel mark. This represents a significant decline from the approximate $105 per barrel that oil traded in July, last year.

Q3 Earnings Flourish on Low Fuel Costs

Although it is true that most carriers struggled to post meaningful revenue growth in the third quarter of 2015, courtesy a strong U.S. dollar; nevertheless, their bottom lines benefited owing to low fuel costs.

Delta Air Lines, Inc. ( DAL ), which started off the third-quarter 2015 earnings season on Oct 14, reported 45% growth in its earnings per share (on an adjusted basis) aided by weak fuel costs. Earnings of $1.74 per share beat the Zacks Consensus Estimate by 3 cents.

Other major carriers like Alaska Air Group ( ALK ), American Airlines Group ( AAL ) and United Continental Holdings ( UAL ) have all reported higher-than-expected earnings on the back of cheaper crude.

Low Fuel Costs = Massive Savings

The steep fall in fuel expenses - one of the major input costs for an airline - has naturally resulted in huge savings for carriers. For example, American Airlines Group, which does not hedge fuel costs, expects to generate savings of approximately $5 billion in 2015.

Delta Air Lines, which has restructured its fuel hedge portfolio in the wake of the soft fuel price environment, expects to generate significant savings in 2015. Carriers like United Continental and Southwest Airlines ( LUV ) are also on track to generate huge savings in 2015, thanks to the massive cut in oil prices.

Decline in Oil Prices Spur Buyback Activity

The substantial savings have undoubtedly bolstered the financial health of carriers. This has prompted the airline companies to launch share buyback programs, make increased dividend payments and significantly reduce their debt levels.

For example, on the third quarter conference call, the board of directors at American Airlines authorized an additional $2 billion share buyback program which is expected to be completed by Dec 31, 2016. Carriers like Delta, Southwest Airlines and United Continental have also announced such shareholder friendly plans this year.

With most airline companies in the pink of financial health, it is only natural that their employees will demand higher pays. As airline employees look to boost their pay, negotiations between carriers and various labor groups on new contracts and terms pertaining to pay and other benefits are rampant in the airline industry.

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DELTA AIR LINES (DAL): Free Stock Analysis Report

ALASKA AIR GRP (ALK): Free Stock Analysis Report

AMER AIRLINES (AAL): Free Stock Analysis Report

UNITED CONT HLD (UAL): Free Stock Analysis Report

SOUTHWEST AIR (LUV): 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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