For Immediate Release
Chicago, IL – May 23, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include United Continental Holdings (UAL),Southwest Airlines (LUV), American Airlines Group (AAL), Airbus Group (PA:AIR) SE (EADSY) and Air France-KLM SA ( AFLYY).
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Here are highlights from Friday’s Analyst Blog:
U.S. Carriers Sell Off in Wake of EgyptAir Tragedy
Shares of major airlines stocks like United Continental Holdings (UAL ), Southwest Airlines (LUV) and American Airlines Group ( AAL) lost ground following the disappearance of an EgyptAir jet. With airline stocks plummeting on the news, the NYSE ARCA Airline index declined 1.48% to $83.62 on May 19.
According to various media reports, EgyptAir (MS804), which was flying from Paris to Cairo, dropped off the radar over the Mediterranean sea. Apparently, 56 passengers and 10 crew members were on board the Airbus Group SE’s (EADSY) A320. According to latest media report, debris from the plane were found in the Mediterranean Sea.
Will Travel Demand Drop?
According to a Bloomberg report, Egypt’s aviation minister Sherif Fathy cited terrorism as a probable cause behind the incident. If the speculations come true, this would mark the second major terror act in the aviation space. We remind investors that in March this year, terror attacks at the Brussels airport and the Maelbeek metro station in central Brussels claimed over 25 lives and injured more than 200 people.
The disappearance of the EgyptAir jet liner and the subsequent fear of another terror attack hit tourism stocks with the effect spreading to the U.S.-based airline stocks which lost value on apprehensions of a fall in travel demand in Europe. We note that major airline stocks have a strong presence in the European market. For instance, Delta Air Lines (NYSE:DAL) had stated during its first-quarter conference call that the trans-Atlantic market is responsible for 15% to 20% of its revenues. No wonder, the fear of a fall in air travel demand has hit U.S. airline stocks hard.
Terror Attacks: A Major Concern
Even though airline stocks are benefiting immensely from the oil price slump, acts of terrorism continue to hurt stocks in the space. In fact, such attacks are becoming alarmingly more frequent. The March Brussels attacks impacted Delta’s top line in the first quarter of 2016 while the attacks in Paris last year had impacted Air France-KLM SA (AFLYY).
Apart from terror attacks, challenges like outbreaks of diseases like the Zika virus and disputes similar to the ongoing one between legacy U.S. carriers and their Gulf counterparts are a major threat to aviation stocks.
Although it has not yet been proved conclusively that the flight from Paris to Cairo was a victim to another terror act, we believe that in the event of it being proved so, travel to Europe will take a hit. In case of a drop in demand during the peak summer season, U.S. airline stocks would suffer as trans-Atlantic flights generate a significant portion of their revenues.
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UNITED CONT HLD (UAL): Free Stock Analysis Report
SOUTHWEST AIR (LUV): Free Stock Analysis Report
AMER AIRLINES (AAL): Free Stock Analysis Report
AIRBUS GROUP NV (EADSY): Free Stock Analysis Report
AIR FRANCE-ADR (AFLYY): Free Stock Analysis Report
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