Airline Stock Roundup: U.S. Airfares Continue To Decline, CPA & ALK In Focus

The past week, which included a holiday in the form of Presidents' Day, saw the release of data on airfare for January by the Bureau of Transportation Services. Airfares declined in the month, marking the third consecutive month of a drop in ticket prices.

Even though, the low air fares are encouraging for fliers, it is likely to hurt the top line of airline companies. Capacity overexpansion by some carriers in key markets leading to intense competition may have resulted in the decline of airfares.

On the traffic front, Copa Holdings, S.A. (NYSE:CPA) and Alaska Air Group, Inc. (NYSE:ALK) unveiled their respective traffic numbers for January. Load factor (percentage of seats filled by passengers) increased at Copa Holdings for the month. However, the metric declined at Alaska Air Group as capacity expansion exceeded traffic growth. Southwest Airlines Co. (NYSE:LUV) was also in the news during the week, by virtue of its expansion-related update.

(Read the last Airline Stock Roundup for Feb 14,2018).

Recap of the Past Week’s Most Important Stories

1. According to data released by the Bureau of Transportation Services, in the United States average air fares (adjusted) fell 0.6% in January compared with the figure a month ago (on a seasonally adjusted basis). Also, air fares decreased 5.1% (unadjusted) in the same month on a year-over-year basis.

2. At Alaska Air Group, consolidated traffic (measured in revenue passenger miles or RPMS) increased 3.5% to approximately 4 billion. Consolidated capacity (measured in average seat miles or ASMs) was up 6.6% to 5.2 billion. Load factor at this Seattle, WA-based carrier declined 230 basis points to 75.8% (Read more: Alaska Air Group's January Load Factor Declines, Stock Falls).

3. At Copa Holdings, traffic came in at 1.82 billion, up 5.8% from the year-ago figure. On a year-over-year basis, consolidated capacity improved 5.4% to 2.17 billion. Load factor also expanded 40 basis points (bps) to 84% (Read more: Copa Holdings Reports Robust January Traffic Figures).

Copa Holdings holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

4. Southwest Airlines extended its flight schedule through Oct 1, 2018. In the process, this low-cost carrier added several non-stop flights to better cater to the increased demand for air travel along those routes. Notably, the carrier has decided to add non-stop flights connecting Nashville and Atlanta, Cincinnati and Denver, Raleigh-Durham and Kansas City.

The company announced its intention to launch additional flights to strengthen its presence in Los Angeles as well. Meanwhile, it still expects capacity in the current year to grow in the low 5 % range on a year-over-year basis.

5. In a bid to modernize its fleet further, United Continental Holdings, Inc. (NYSE:UAL) announced the addition of Boeing (NYSE:BA) 737 MAX 9 planes to its fleet. The fuel-efficient planes are expected to take to the skies on Jun 7, 2018 through services between Houston's George Bush Intercontinental Airport and five cities. The new additions to the carrier’s fleet will start operating from its Los Angeles hub effective Jun 29, through flights connecting Los Angeles and Honolulu.

Price Performance

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

The table above shows that most airline stocks traded in the green over the past week, leading to the increase (3.3%) in the NYSE ARCA Airline Index. Over the course of six months, the sector tracker has appreciated 10.3%, driven by impressive gains at the likes of Gol Linhas Aéreas Inteligentes S.A. (NYSE:GOL) , American Airlines Group Inc. (NASDAQ:AAL) , Southwest Airlines and Delta Air Lines, Inc. (NYSE:DAL) .

What's Next in the Airline Space?

Apart from the usual news updates, investors will look forward to fourth-quarter earnings report of Copa Holdings.

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