Airline Stock Roundup: LUV Trims Q3 Cost Guidance, RYAAY, DAL In Focus

In the past week, Southwest Airlines (NYSE:LUV) issued an upbeat guidance for third-quarter 2019 unit cost growth. According to this Dallas-based low-cost carrier, its prudent expense management and the shift of certain cost items from the third to the fourth quarter of 2019 were the primary reasons behind the trimmed cost guidance.

Ryanair Holdings (NASDAQ:RYAAY) also dominated the headlines following its CEO Michael O'Leary’s decision related to Boeing (NYSE:BA) 737 MAX jets in the company’s fleet. Per O'Leary, this European low-cost carrier might resume flying the currently grounded 737 MAX jets by late February or early March next year. Ryanair also stated that its UK-based cabin crew approved a four-year collective deal.

Meanwhile, Delta Air Lines’ (NYSE:DAL) steady initiatives for expanding its presence globally are commendable. The company intends to start operating additional flights between the United States and Europe next year. JetBlue Airways (NASDAQ:JBLU) took a significant step related to its fleet-modernization initiatives, with its new Airbus A321neo jet commencing passenger service officially.

(Read the last Airline Stock Roundup here).

Recap of Past Week’s Most Important Stories

1. Southwest Airlines canceled 600 flights in September due to Hurricane Dorian. However, the company does not expect the flight cancellations to significantly hurt its third-quarter 2019 results, scheduled to be released on Oct 24. Owing to upbeat demand for air travel and strong passenger yields, the carrier still expects its third-quarter operating revenue per available seat mile (RASM) to increase in the 3-5% range on a year-over-year basis.

Moreover, non-fuel unit costs are now estimated to increase between 8% and 10% compared with the 9-11% uptick anticipated previously. (Read more: Southwest Buoys Hope With Q3 Unit Cost Guidance Cut).

2. Ryanair, which has been engulfed with labor-related problems for quite a while, received encouraging tidings on the front from its pilots and cabin crew in the UK, represented by the British Airline Pilots Association (BALPA), cancelled their plans of going on strike for five days in September. Instead they agreed to resume discussions with the carrier on the points of dispute. Furthermore, the carrier’s UK-based cabin crew voted overwhelmingly in favor of a pay-related deal.

Furthermore, at its annual general meeting, O'Leary issued an update on the currently grounded Boeing 737 MAX jets. Notably, Ryanair is one of Boeing’s biggest 737 MAX customers, with 135 firm aircraft orders and 75 options. (Read more: Ryanair Hopes to Fly Boeing 737 MAX Next February or March).

Ryanair carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3. As part of its efforts to expand in Europe and provide passengers with increased options, Delta aims to operate four additional trans-Atlantic flights from Boston next year (transatlantic capacity is expected to be expanded more than 30% next year). This will include new seasonal (summer: May 21-Sep 7) service to Rome, the introduction of a second daily flight to Paris apart from additional flights to London-Gatwick and Manchester from Boston. (Read more: Delta to Introduce More Flights Connecting US & Europe).

4. The entry of the first highly fuel-efficient (20% increase in fuel efficiency compared with the existing fleet) Airbus A321neo planes into scheduled service might enable JetBlue serve new markets as these planes boast a 500 nautical mile increase in range. The first flight was from New York’s John F. Kennedy International Airport (JFK) to Fort Lauderdale-Hollywood International Airport (FLL). The carrier stated that flights connecting New York JFK to Guayaquil, Ecuador, (scheduled to begin on Dec 5, 2019) and to Georgetown, Guyana, (scheduled to begin on Apr 2, 2020) will be operated by these new jets.

Notably, JetBlue placed orders for 85 such jets long back. However, deliveries of the same were delayed due to production issues at Airbus. The first of these planes, equipped with modern facilities like a brand-new cabin and new in-flight entertainment system, were delivered in late June this year. The A321neo has now started flying passengers after test flights were conducted for some time following delivery by Airbus. JetBlue had stated in July that it expects to receive five more such jets in 2019.

5 In a customer-friendly move, United Airlines (NASDAQ:UAL) has decided to introduce PlusPoints in a bid to usher in new upgrade benefits for its MileagePlus Premier members. The new system will be effective from Dec 4, 2019. The Chicago-based carrier aims to replace the existing Regional Premier Upgrades (RPU) and Global Premier Upgrades (GPU) with PlusPoints. Each RPU and GPU will be worth 20 and 40 PlusPoints, respectively.


Performance

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

The table above shows that almost all airline stocks traded in the red over the past week, resulting in the NYSE ARCA Airline Index declining 2.1% to $97.15. Over the course of six months, the same appreciated almost 3.6% despite double-digit losses at the likes of American Airlines (NASDAQ:AAL) and Spirit Airlines (NYSE:SAVE) .

What's Next in the Airline Space?

Stay tuned for usual news updates in the space.

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