Airline Stock Roundup: UAL's Bullish View for August Schedule, RYAAY in Focus

In the past week, United Airlines UAL grabbed headlines following its announcement that its schedule for August will be thrice its June capacity. This decision came in line with the recent uptick in air traffic in the United States despite a second-wave spurt in coronavirus cases. Notably, owing to this recovery in domestic travel demand, American Airlines AAL lifted the booking cap on its flights from Jul 1, as mentioned in the previous week’s write up.

However, with international travel demand continuing to be soft on a year-over-year basis, American Airlines expects to reduce the long-haul international capacity by 25% during summer 2021. Meanwhile, the European low-cost carrier Ryanair Holdings RYAAY too was in news as it offered an upbeat forecast for July air-travel demand. Per a Reuters report, the airline expects to carry more than 4.5 million passengers on its flights in the month. Even though the above reading marks a 70% decline from the actual number of passengers flown in last July, the same represents a marked improvement from the coronavirus-ravaged months of April and May.

Recap of the Past Week’s Most Important Stories

1.  United Airlines, currently carrying a Zacks Rank #3 (Hold), plans to add nearly 25,000 flights in August, triple the size of its June schedule, as air travel demand (especially leisure travel demand) improves steadily. With this, the carrier will fly about 40% of its August 2019 schedule.On the international front, United Airlines will fly about 25% of its August 2019 schedule.

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

2.    Ryanair reported a 97% year-over-year plunge in June traffic to merely 0.4 million guests. As wide-spread travel restrictions are still in place, the carrier’s LaudaMotion unit in Austria did not carry any passenger during the month. Nevertheless, in response to the recent rise in demand, the unit reopened on Jul 1.

Ryanair operated 2800 scheduled flights in June with 95% arriving on time. On a rolling annual basis, total traffic at Ryanair (including the LaudaMotion unit) declined 27% to 107.2 million.

3.    Apart from trimming international capacity for next summer, American Airlines plans to discontinue services to several leisure destinations that it expects will show reduced demand trends. Evidently, the airline will terminate three trans-Atlantic routes from Charlotte Douglas International Airport and Philadelphia International Airport. Additionally, it will cease operations on five underperforming routes from Los Angeles International Airport to destinations in Asia and South America. In a bid to lend customers a flexible booking experience, the carrier extended its change fee waiver for new tickets to be booked through Jul 31, 2020.

4.    JetBlue Airways Corporation JBLU and its pilots union inked a deal to avoid involuntary furloughs until May 1, 2021 according to a CNBC report.  Although the details of the agreement remained undisclosed, the union agreed on not changing any pay rates.

5.    With the coronavirus pandemic affecting air-travel demand severely, Gol Linhas Aereas Inteligentes GOL did not operate regular international flights during June. Its total monthly traffic, measured in revenue passenger kilometers (RPK), tanked 88% on a year-over-year basis. With Gol Linhas lowering capacity in response to dwindling demand, total monthly capacity (measured in available seat miles) contracted 87.4%

Moreover, consolidated load factor (% of seats filled by passengers) fell to 79.1% from 83% a year ago. Load factor declined as the fall in traffic was more than capacity contraction. Gol Linhas’ total monthly departures slumped 86.9% and seats plummeted 87.9%.

However, with air-travel demand improving on the domestic front, domestic demand soared 95.4% from the level witnessed in May 2020. Additionally, domestic supply in June surged 84.8% on a month-on-month basis.

Performance

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

 

The table above shows that most airline stocks have traded in the green in the past week as air traffic continues to display an uptrend despite the spike in COVID-19 cases across the United States. This upside led the NYSE ARCA Airline Index to inch up 1.7% to $55.06. However, over the course of the past six months, the NYSE ARCA Airline Index has depreciated 17.3%.

What's Next in the Airline Space?

June traffic reports from the likes of Allegiant Travel Company ALGT will be awaited by investors in the coming days.

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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
 
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