Airline Stock Roundup: UAL Management Changes; DAL, LUV In Focus

The past week saw Chicago-based United Continental Holdings (NYSE:UAL) shaking up its management team by appointing a new chief financial officer and chief commercial officer. A couple of updates emanated from Southwest Airlines Co. (NYSE:LUV) over the past week.

Apart from announcing the retirement of its Labor Relations Chief, the low-cost carrier also revealed its intention to operate flights connecting Los Angeles and three Mexican destinations. Delta Air Lines (NYSE:DAL) also featured in the news as it attempts to reach a pay-related agreement with its pilots.

Meanwhile, according to the employment data for passenger airlines, there was a substantial year-over-year increase in full-time equivalent (FTE) employment this June.

TRANSPORTATION-AIRLINE Industry Price Index

TRANSPORTATION-AIRLINE Industry Price Index

(Read the last Airline Stock Roundup for Aug 17, 2016).

Recap of the Past Week’s Most Important Stories

1. According to data released by the Bureau of Transportation Statistics, there was a 3.9% increase in the number of workers employed by U.S. scheduled passenger airlines in June. This marked the 32nd consecutive month of year-over-year increase. The report also stated that the number of FTEs (412,333) for June 2016 was the highest since June 2008.

According to the update, the most number of FTEs in the month were employed by the American Airlines Group (NASDAQ:AAL) , among the network airlines. Southwest Airlines and SkyWest (NASDAQ:SKYW) took the honors in the low-cost and regional carrier categories respectively.

2. Delta Air Lines has been facing tough time with an ongoing dispute related to the salary of its pilots. Delta has offered a 27% hike in salary to the pilots, over a period of four years. Contrary to Delta’s offer, the pilots are demanding a raise of around 37% over three years (read more: Delta Air Lines, Pilots Struggle to Reach Salary Agreement).

3. In an attempt to expand further, Southwest Airlines announced that it plans to launch new flights to Mexico later this year. The flights will operate between Los Angeles and three Mexican destinations – Cancun, San Jose del Cabo and Puerto Vallarta. The flights are expected to start from Dec 4, subject to approval from the government of Mexico (read more: Southwest Airlines Announces New Flights to Mexico).

On a separate note, Southwest Airlines declared that Randy Babbitt, Senior Vice President of Labor Relations will be retiring this fall. Babbitt is a veteran in the field of aviation with 50 years of experience. Babbitt had joined the Dallas-based low-cost carrier in 2012. Babbitt will be leaving at a time when Southwest Airlines is embroiled in a labor-related dispute, with some of its labor groups demanding the removal of the carrier’s top executives

4. United Continental Holdings announced changes to its managerial team. The company appointed Andrew Levy as Executive Vice President and Chief Financial Officer. Levy, who has had leadership experience of more than 13 years at Allegiant Travel Company (NASDAQ:ALGT) , will replace the acting CFO Gerry Laderman. Laderman will go back to his position as the senior vice president, finance, procurement and treasurer.

Meanwhile, Julia Haywood has been appointed as executive vice president and chief commercial officer. The chief revenue officer and vice chairman of the company, Jim Compton, is expected to retire after the transition by the end of 2016.

The new appointments are one of the several major decisions undertaken by Oscar Munoz, as he strives to bring about a turnaround at United Continental.

5. According to an Associated Press report, air travel between the US and Mexico will become more accessible with majority of the restrictions being removed. A liberalized aviation treaty between the two countries was inked last year. This will allow freedom to the carriers to operate on any route (with limitless frequency) of their choice between the neighboring countries. With competition likely to intensify across the cross-border routes, once operational, the deal should help make airfares across the routes more pocket friendly.

Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months.

The table above shows that airline stocks exhibited a mixed trend over the past week. Consequently, the NYSE ARCA Airline index declined marginally to $88.41 over the past 5 trading days.

Over the course of six months, the NYSE ARCA Airline index depreciated marginally despite huge gains at GOL Linhas and Virgin America . Shares of JetBlue Airways Corp. (NASDAQ:JBLU) depreciated the most (31.71%) over the period.

What's Next in the Airline Space?

We anticipate further updates on Delta’s ongoing pay-related dispute with its pilots. Moreover, stay tuned for usual news updates in the space.