Airline Stock Roundup: Pilots' Contract Ratified At SAVE, DAL Traffic & More

In the last five trading days, pilots at Spirit Airlines, Inc. (NYSE:SAVE) ratified the tentative five-year contract pertaining to a pay raise. As costs are likely to increase following the ratification, the low-cost carrier revised its current-quarter and year projections.

On the traffic front, Delta Air Lines, Inc. (NYSE:DAL) and Hawaiian Holdings, Inc.’s (NASDAQ:HA) subsidiary — Hawaiian Airlines — reported impressive numbers for February. Load factor (% of seats filled with passengers) increased at both carriers as traffic growth outpaced capacity expansion. Additionally, Hawaiian Airlines was in the news owing its fleet modernization efforts.

Alaska Air Group Inc.’s (NYSE:ALK) subsidiary — Alaska Airlines — also hit the headlines by virtue of its codeshare agreement with Fiji Airways — Fiji's national carrier. Furthermore, due to winter storm, U.S. carriers had to cancel multiple flights during the week, which might hurt revenues in the current quarter.

Transportation - Airline Industry 5YR % Return

Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for Feb 28, 2018).

Recap of the Past Week’s Most Important Stories

1. At Delta, consolidated traffic, measured in revenue passenger miles (RPMs), came in at 14.69 billion, up 3.8% year over year. Consolidated capacity (or available seat miles/ASMs) climbed 3.4% to 18.03 billion on a year-over-year basis. Load factor improved 40 basis points to 81.5% in February (Read more: Delta Reports Impressive February Traffic Figures).

On a separate issue, this Atlanta, GA-based company’s decision to sever ties with the National Rifle Association (“NRA”) in the wake of the shooting in a Florida high school, does not seem to have gone down well with Georgia lawmakers. During the week, they reportedly passed a tax bill that excluded jet fuel tax exemption. Inclusion of the said provision, would have boosted the bottom line of this Zacks Rank #2 (Buy) carrier through significant savings per year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. Pilots at Spirit Airlines ratified a contract pertaining to their pay, with 70% of them voting in favor of the deal. Following the ratification, wages of pilots increase by an average of 43% apart from other benefits. Subsequently, the carrier revised its current-quarter and year projections with respect to certain metrics. For example, cost per available seat mile (CASM), excluding fuel, is expected to decline 3% in the quarter compared with the prior projection of 5.5-6.5% (Read more: Spirit Airlines Revises View Post Pilot Contract Ratification).

3. Airline operations were severely disrupted for a couple of days from Mar 2, 2018 due to the deadly nor’easter in the Mid-Atlantic and Northeast of United States. Notably, this winter storm impeded travel plans and caused harassments to passengers. It caused heavy snowfall accompanied by hurricane-force winds in excess of 120 kilometers per hour in the affected areas (Read more: Nor'easter Cripples Airline Operations: What Lies Ahead?).

4 Alaska Airlines entered into a bilateral codeshare agreement with Fiji Airways. Per the deal, Fiji Airways can place its "FJ" code on Alaska Airlines operated flights from San Francisco to two popular destinations in the United States — Seattle and Portland. Additionally, the contract provides extended and seamless connectivity between flights of the two carriers. In fact, by inking this deal, Alaska Airlines and Fiji Airways have expanded their partnership (Read more: Alaska Air Group Arm to Share Codes With Fiji Airways).

5. In a bid to upgrade its fleet, Hawaiian Airlines executed a non-binding Letter of Intent (LOI) for buying 10 Boeing (NYSE:BA) Dreamliners. The first of the fuel-efficient, lightweight Boeing 787-9 aircraft is expected to join its fleet in the first quarter of 2021. Moreover, Hawaiian Airlines has options to purchase 10 more such planes.

On a separate issue, February load factor at Hawaiian Airlines increased 190 basis points to 84.8% as traffic growth (7.4%) outpaced capacity expansion (4.9%) in the month.

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 most airline stocks traded in the red over the past week, though the losses were muted in nature. Consequently, the NYSE ARCA Airline index decreased 1.7% in the period. Over the past six months, the NYSE ARCA Airline index appreciated 10.5% backed by robust gains at the likes of Gol Linhas Aéreas Inteligentes S.A.

What's Next in the Airline Space?

Investors look forward to February traffic reports from the likes of Southwest Airlines Co. (NYSE:LUV) in the coming days. Focus will also remain on updates on the disagreement between American Airlines Group Inc. (NASDAQ:AAL) and United Continental Holdings, Inc. (NYSE:UAL) pertaining to gate allocation at Chicago's O'Hare International Airport

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