Hot Airline Companies To Watch In Right Now


Not every luxury retailer is raking it in these days.

Shares of Joe’s Jeans (NASDAQ: JOEZ  ) were slammed today after posting disappointing quarterly results.

The retailer of high-priced denim clocked in with roughly half of the revenue growth that Wall Street was targeting. Declining profitability also missed the mark.

Joe’s Jeans grew its net sales by 8%, to $30.9 million, fueled largely by its chain store expansion efforts.

Analysts were holding out for top-line growth of 15%, but that obviously didn’t happen. The 6% uptick in its wholesale business was disappointing, but the real letdown happened at the retail level. Joe’s Jeans managed to post a 14% increase in net sales for the quarter, but that was with eight new store locations that have opened over the past year. Same-store sales actually plunged 6% during the period, and that’s the real dagger.


Investors had been treated to largely positive trends when luxury retailers were reporting fresh financials.

Hot Airline Companies To Watch In Right Now: Delta Air Lines Inc (DAL)

Delta Air Lines, Inc. (Delta) provides scheduled air transportation for passengers and cargo throughout the United States and around the world. The Company’s route network gives it a presence in every domestic and international market. Delta’s route network is centered around the hub system it operate at airports in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Paris-Charles de Gaulle, Salt Lake City and Tokyo-Narita. Each of these hub operations includes flights that gather and distribute traffic from markets in the geographic region surrounding the hub to domestic and international cities and to other hubs. The Company’s network is supported by a fleet of aircraft that is varied in terms of size and capabilities.


Delta has bilateral and multilateral marketing alliances with foreign airlines to improve its access to international markets. These arrangements can include code-sharing, reciprocal frequent flyer progr am benefits, shared or reciprocal access to passenger lounges, joint promotions, common use of airport gates and ticket counters, ticket office co-location, and other marketing agreements. Its international code-sharing agreements enable it to market and sell seats to an expanded number of international destinations. The Company has international codeshare arrangements with Aeromexico, Air France, Air Nigeria, Alitalia, Aeroflot, China Airlines, China Eastern, China Southern, CSA Czech Airlines, KLM Royal Dutch Airlines, Korean Air, Olympic Air, Royal Air Maroc, VRG Linhas Aereas (operating as GOL), Vietnam Airlines, Virgin Australia and WestJet Airlines.


In addition to the Company’s marketing alliance agreements with individual foreign airlines, it is a member of the SkyTeam airline alliance. Delta also has frequent flyer and reciprocal lounge agreements with Hawaiian Airlines, and codesharing agreements with American Eagle Airlines (American Eagle) and Hawai ian Airlines. It has air service agreements with multiple do! mestic regional air carriers that feed traffic to its route system by serving passengers primarily in small-and medium-sized cities.

Through the Company’s regional carrier program, it has contractual arrangements with 10 regional carriers to operate regional jet and, in certain cases, turbo-prop aircraft using its DL designator code. In addition to Delta’s wholly owned subsidiary, Comair, it has contractual arrangements with ExpressJet Airlines, Inc. and SkyWest Airlines, Inc., both subsidiaries of SkyWest, Inc.; Chautauqua Airlines, Inc. and Shuttle America Corporation, both subsidiaries of Republic Airways Holdings, Inc.; Pinnacle Airlines, Inc. and Mesaba Aviation, Inc. (Mesaba), both subsidiaries of Pinnacle Airlines Corp. (Pinnacle); Compass Airlines, Inc. (Compass) and GoJet Airlines, LLC, both subsidiaries of Trans States Holdings, Inc. (Trans States), and American Eagle.


The Company’s SkyMiles program allows program members to earn mil eage for travel awards by flying on Delta, Delta’s regional carriers and other participating airlines. Mileage credit may also be earned by using certain services offered by program participants, such as credit card companies, hotels and car rental agencies. In addition, individuals and companies may purchase mileage credits. The Company reserves the right to terminate the program with six months advance notice, and to change the program’s terms and conditions at any time without notice.


SkyMiles program mileage credits can be redeemed for air travel on Delta and participating airlines, for membership in the Company’s Delta Sky Clubs and for other program participant awards. Mileage credits are subject to certain transfer restrictions and travel awards are subject to capacity controlled seating. During the year ended December 31, 2011, program members redeemed more than 275 billion miles in the SkyMiles program for more than 12 million award redemptions. D uring 2011, 8.2% of revenue miles flown on Delta were from a! ward trav! el.


The Company generates cargo revenues in domestic and international markets through the use of cargo space on regularly scheduled passenger aircraft. Delta is a member of SkyTeam Cargo, an airline cargo alliance. SkyTeam Cargo offers a network spanning six continents and provides customers an international product line.

The Company has several other businesses arising from its airline operations, including aircraft maintenance, repair and overhaul (MRO); staffing services for third parties; vacation wholesale operations, and its private jet operations. Delta’s MRO operation, known as Delta TechOps, is an airline MRO in North America. In addition to providing maintenance and engineering support for its fleet of approximately 775 aircraft, Delta TechOps serves more than 150 aviation and airline customers. Its staffing services business, Delta Global Services, provides staffing services, professional security, training services and aviation soluti ons to approximately 150 customers. The Company’s vacation wholesale business, MLT Vacations, is the provider of vacation packages in the United States. Its private jet operations, Delta Private Jets, provides aircraft charters, aircraft management and programs allowing members to purchase flight time by the hour.


The Company competes with SkyTeam, United Air Lines, Continental Airlines, Lufthansa German Airlines, Air Canada, American Airlines, British Airways and Qantas.

Advisors’ Opinion:

  • [By Ben Levisohn]

    Shares of American Airlines have dropped 2.5% to $36.70 at 2:03 p.m. today, though it’s not the only airline getting pounded. United Continental (UAL) has fallen 3.1% to $47.83 and Delta Air Lines (DAL) has declined 1.6% to $38.03.

  • [By Ben Levisohn]

    Airlines stocks are facing turbulence today after Merrill Lynch downgraded JetBlue (JBLU) to Underperform from Neutral. Delta Air Lines (DAL) American Airlines (AAL), United Continental (UAL) and Southwest Airlines (LUV) have all dropped today.

Hot Airline Companies To Watch In Right Now: Ryanair Holdings PLC (RYA)


Ryanair Holdings plc (Ryanair Holdings), is a holding company for Ryanair Limited (Ryanair). Ryanair operates a low-cost, scheduled-passenger airline serving short-haul, point-to-point routes between Ireland, the United Kingdom, Continental Europe, and Morocco. As of June 30, 2012, the Company offered approximately over 1,500 scheduled short-haul flights per day serving approximately 160 airports largely throughout Europe with an operating fleet of 294 aircraft flying approximately 1,500 routes. Ryanair sells seats on a one-way basis. The Company also holds a 29.8% interest in Aer Lingus Group plc. As of June 30, 2012, Ryanair’s operating fleet was composed of 294 Boeing 737-800 aircraft, each having 189 seats. Ryanair’s fleet totaled 294 Boeing 737-800s at March 31, 2012. As of June 30, 2012, Ryanair owned and operated four Boeing 737-800 full flight simulators for pilot training. Advisors’ Opinion:

  • [By Inyoung Hwang]

    Ryanair Holdings Plc (RYA), the discount airline operator that’s the second-biggest stock in Ireland’s ISEQ index, declined 1.7 percent to 7.23 euros in Dublin. Kerry Group, a supplier of food ingredients, sank 1.4 percent to 45.24 euros.

Hot Airline Companies To Watch In Right Now: Alaska Air Group Inc. (ALK)

Alaska Air Group, Inc., through its subsidiaries, Alaska Airlines, Inc. and Horizon Air Industries, Inc., operates as an airline company serving destinations in the western United States, Canada, and Mexico. The company provides passenger air services; and freight and mail services primarily to and within the state of Alaska and on the West Coast. As of December 31, 2009, it operated a fleet of 110 jet aircraft; and Horizon Air Industries operated a fleet of 18 jets and 40 turboprop aircraft. The company was founded in 1932 and is based in Seattle, Washington.


Advisors’ Opinion:

  • [By Teresa Rivas]

    Earlier this week, they cut their rating on budget carrier Spirit Airlines (SAVE), and upgraded JetBlue (JBLU) to Buy in late August.  Today, they reiterated their Outperform rating and $58 price target on Alaska Air Group (ALK), writing that the company continues to post solid results despite a difficult macro environment—a fact that the market isn’t fully valuing.

  • [By Ben Levisohn]

    Shares of Alaska Air (ALK) are falling today after it was cut by the folks at Raymond James, while Delta Air Lines (DAL) is gaining after getting hit hard earlier this week.


    Associated Press

    Raymond James analysts Savanthi Syth and James Parker explain why they downgraded Alaska Air:

    We are downgrading Alaska Air from Outperform to Market Perform due to the risk to our 2015 EPS estimate from intensifying competitive capacity pressure. While 1Q15 schedules are still very preliminary, it appears competitive seat capacity growth is set to accelerate to 12% y/y from the already elevated ~6% y/y level over the previous 6 quarters. We continue to believe that Alaska will use its dominant market position and strong balance sheet to successfully compete with Delta and support its stock. However, while the competitive issues in Seattle are not new, we believe significant upside to the stock in the near term is unlikely given risks to 2015 earnings estimates.


    Speaking of Delta, it plunged 5.2% on Wednesday after the airline said revenues would be lower than it thought. Wolfe Research’s Hunter Keay and Jared Shojaian look into Delta’s miss:

    August was the third straight month of underwhelming PRASM results from Delta Air Lines. Perhaps not coincidentally Alaska Air and JetBlue (JBLU) have been underperforming industry PRASM lately as well, two airlines defending themselves against Delta Air Lines. To be sure, Delta Air Lines’ PRASM is still growing faster than its CASM, which means margins are expanding y/y, but the rate of margin change is likely to be “less good” relative to United Continental (UAL) and American Airlines (AAL) due to Delta Air Lines’ capacity choices. We like Delta Air Lines, just not as much as most other Outperform-rated airlines.


    Shares of Alaska Air have dropped 1.1% to $47.13 at 1:53 p.m., while Delta Air Lines has gained 0.5% to $39.47, JetBlue has risen 0.4% to $12.57, United Continent

  • [By Dimitra DeFotis]

    Delta Air Lines (DAL) is leading the pack after reporting traffic figures for the past month; its shares are down 5.5%. American Airlines (AAL) also is off 5%, and United Continental Holdings (UAL) is off 6.4%. Domestically-oriented airlines fared better, but shares also are in the red: JetBlue Airways (JBLU)  and Alaska Holdings (ALK) are each down roughly 2%, while Southwest Airlines (LUV) is down nearly 1%.

  • [By Ben Levisohn]

    Spirit Airlines (SAVE), Delta Air Lines (DAL), Alaska Air (ALK) and American Airlines (AAL) ranked behind Allegiant and all had ROIC – WACC spreads that were 4 – 5 points. We are of the view that an airline with ROIC – WACC spread of at least 3 points (based on the industry’s historical WACC) has sufficient flexibility to pay down debt, re-invest in the business, and pursue pro-shareholder initiatives. If current trends hold, we believe United Continental (UAL) with a 2.3 point spread (produced in 2013) will be well-positioned to return capital to shareholders by 2015.

Hot Airline Companies To Watch In Right Now: Copa Holdings SA (CPA)


Copa Holdings, S.A. (Copa Holdings), incorporated on May 06, 1998, is a Latin American provider of airline passenger and cargo service through its two principal operating subsidiaries, Copa Airlines and Copa Colombia. Copa Airlines operates from its position in the Republic of Panama, and Copa Colombia provides service within Colombia and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, Mexico, Cuba, Guatemala and Costa Rica, complemented with service within Colombia. As of December 31, 2012, the Company operated a fleet of 83 aircraft with an average age of 5.13 years; consisting of 57 modern Boeing 737-Next Generation aircraft and 26 Embraer 190 aircraft. . As of December 31, 2012, the Company offers approximately 334 daily scheduled flights among 64 destinations in 29 countries in North, Central and South America and the Caribbean, mainly from its Panama City Hub.


Copa provides passengers with access to flights to more th an 150 other destinations through codeshare arrangements with UAL pursuant to which each airline places its name and flight designation code on the other’s flights. As of December 31, 2012, Copa had firm orders, including purchase and lease commitments, for 35 additional Boeing 737-Next Generation aircraft. Copa also has options for an additional 14 Boeing 737-Next Generation aircraft.

The Company competes with Avianca-Taca, American Airlines, Delta Air Lines, American Airlines and LAN Group.


Advisors’ Opinion:

  • [By Jayson Derrick]

    Analysts at JPMorgan maintained an Overweight rating on Copa Holdings (NYSE: CPA) with a price target raised to $168 from a previous $163. Shares lost 0.25 percent, closing at $125.38.

  • [By Will Ashworth]

    I don’t know what’s going to happen in six months, let alone 20 years. However, I do know that OLED plays in a very exciting space, and Discovery Capital still seems to agree. Financially, OLED stock is solid, and if things go the company’s way in the coming years, it should get big in a hurry.


    Best Stocks #3 (Midcap): Copa Holdings (CPA)

    I’m a big believer in Latin America. While it has its troubles like every other emerging market, I continue to view its growing middle class with envy. While our middle class is being hallowed out, Latin America’s is growing exponentially. The U.S. was never more secure economically than when its middle class was growing, so history has demonstrated what this can do for a country.

Hot Airline Companies To Watch In Right Now: Controladora Vuela Compania de Aviacion SAB de CV (VLRS)


Controladora Vuela Compania de Aviacion SAB de CV (Volaris Aviation Holding Company) is a Mexico-based company principally engaged in the airline passenger transportation industry. The Company is a law-cost carrier airline. Controladora Vuela Compania de Aviacion SAB de CV offers direct, point-to-point flights. The Company serves through secondary, lower cost airports and provides a single class of service. The Company utilizes such aircraft as the Airbus A319 and A320 families, among others. The Company has such subsidiaries as Comercializadora Volaris SA de CV, Servicios Corporativos Volaris SA de CV, Concesionaria Vuela Compania de Aviacion SAPI de CV, Deutsche Bank Mexico SA Trust 1484, among others. Advisors’ Opinion:

  • [By John Udovich]

    When most American investors think of discount airline stocks, they probably think of relatively large capped Southwest Airlines Co (NYSE: LUV) or sort of small cap JetBlue Airways Corporation (NASDAQ: JBLU) rather than small cap Controladora Vuela Co Avcn SA CV (NYSE: VLRS) which owns Volaris – a discount airline serving the Mexican market. However, any investor who has read Benjamin Graham’s Intelligent Investor might want to remember his sage advice about avoiding airline stocks – mainly because airlines were such a new and unproven sector that had yet to make money. But could Controladora Vuela Co Avcn SA CV actually be an airline stock worth owning?

Hot Airline Companies To Watch In Right Now: Virgin Australia Holdings Ltd (VBHLF)


Virgin Australia Holdings Limited (VAH) is an Australia-based company engaged in the development and operation of domestic and international airlines. VAH’s fleet includes ATR-72, Embraer 190, Boeing 737-700, Boeing 737-800, AIRBUS A330 and Boeing 777-300ER. It product includes Airbus A330 Business Class. During the fiscal year ended June 30, 2012, the Company carried 19,468,929 guests on 216 city pairs to 52 destinations, and operated 162,817 flights. On February 22, 2012, under the proposal, all of the shares in the international airline business of Virgin Australia were transferred to a new holding company, Virgin Australia International Holdings Pty Ltd. In April 2013, it acquired 100% of the issued share capital in Skywest Airlines Ltd. In July 2013, Virgin Australia Holdings Limited announced that it has acquired 60% interest of Tiger Airways Australia Pty Limited from Tiger Airways Holdings Limited. Advisors’ Opinion:

  • [By MARKETWATCH]

    LOS ANGELES (MarketWatch) — Australian stocks gave ground in early Friday trading, with banks broadly lower after overnight losses in the U.S., where investors worried that better-than-expected data would prompt the Federal Reserve to roll back stimulus soon. The S&P/ASX 200 (AU:XJO) lost 0.4% to 5,178.30, as National Australia Bank Ltd. (AU:NAB) (NAUBF) fell 1.8%, Australia & New Zealand Banking Group (AU:ANZ) (ANEWF) lost 0.8%, and Macquarie Group Ltd. (AU:MQG) (MCQEF) retreated 1.3%. Among the resource shares, losses for gold both in New York and in early Asian electronic trade helped send Evolution Mining Ltd. (AU:EVN) (CAHPF) down 1.9% and Kingsgate Consolidated Ltd. (AU:KCN) (KSKGF) off 4.5%, though Newcrest Mining Ltd. (AU:NCM) (NCMGF) held the drop to 0.4%. Oil prices managed a modest gain, however, resulting in a 0.2% rise for Oil Search Ltd. (AU:OSH) (OISHF) and Karoon Gas Australia Ltd. (AU:KAR) (KRNGF) , while Woodside Petroleum Ltd. (AU:WPL)

Hot Airline Companies To Watch In Right Now: ANA Holdings Inc (ALNPF)


ANA HOLDINGS INC., formerly All Nippon Airways Co., Ltd., is a Japan-based airline holding company. Its Air Transportation segment is engaged in the air transportation business, the provision of various services at airports, the provision of reservation services via telephone, the freight express business, and the maintenance of aircrafts in domestic and overseas markets. The Traveling segment plans and sells tour packages under the brand names ANA Hello Tour and ANA Sky Holiday, it also offers services to travelers at arrival areas and sells travel products and air tickets. The Others segment involves in the information communication, trading and merchandise business, building management, logistics and airplane fixture repair business, and hotel operation. On March 4 and March 5, 2013, it fully acquired all shares of one and two consolidated subsidiaries through stock swap, respectively, made them become wholly-owned subsidiaries. Advisors’ Opinion:

  • [By Daniel Inman]

    In Tokyo, ANA Holdings (JP:9202)   (ALNPF)  declined 4.7% after the airline lowered its 2013 fiscal-year net profit forecast by 65% on higher fuel costs and slow service expansion because of delays in Boeing (BA)  787 Dreamliner deliveries.

Hot Airline Companies To Watch In Right Now: JetBlue Airways Corporation(JBLU)


JetBlue Airways Corporation provides passenger air transportation services in the United States. As of December 31, 2011, it operated approximately 700 daily flights to 70 destinations in 22 states, Puerto Rico, and Mexico; and 12 countries in the Caribbean and Latin America through a fleet of 120 Airbus A320 aircraft and 49 EMBRAER 190 aircraft. The company, through its subsidiary, LiveTV, LLC, provides in-flight entertainment, voice communication, and data connectivity systems and services for commercial and general aviation aircraft, including live in-seat satellite television, digital satellite radio, wireless aircraft data link service, and cabin surveillance systems. JetBlue Airways Corporation was founded in 1998 and is based in Forest Hills, New York.


Advisors’ Opinion:

  • [By Ben Levisohn]

    Airlines stocks are facing turbulence today after Merrill Lynch downgraded JetBlue (JBLU) to Underperform from Neutral. Delta Air Lines (DAL) American Airlines (AAL), United Continental (UAL) and Southwest Airlines (LUV) have all dropped today.

    AP

    Merrill Lynch cited overconfidence about the possibility for big changes at JetBlue as the reason for its downgrade. Still, just the mention of change at JetBlue–the possibility of a bag fee–has helped it gained 31% during the last six months. Stifel’s Joseph DeNardi considers what a similar change could mean for Southwest Airlines:


    The pushback so far on increasing our [Southwest Airlines] target price to a street-high $55 has been that (1) it is already priced into the stock and reflected in Southwest’s P/E multiple premium, (2) there are not any catalysts in the next 18 months for Southwest to make a meaningful change to its fee strategy, and (3) Southwest can’t change its strategy because of how important the free bags policy is to its brand. If Southwest’s bag-fee call option is priced into the stock, then JetBlue’s should have been also and it wasn’t based on the performance of that stock since management began talking about a first bag fee next year. If JetBlue can successfully implement a first bag fee with no meaningfully negative impact to its brand or customer demand, then Southwest may feel more comfortable doing the same.


    DeNardi also said he continues to favor Delta Air Lines over United Continental, despite the fact that United Continental has outperformed this year:

    While Delta’s stock has underperformed United’s since 2Q EPS, this is clearly a function of relative performance over the past few years and United making up ground it had lost. We suspect that concerns over international capacity are likely to remain an overhang for the network carriers over the next few quarters as investors wait to see to what extent efforts by Delta, United,

  • [By Teresa Rivas]

    Earlier this week, they cut their rating on budget carrier Spirit Airlines (SAVE), and upgraded JetBlue (JBLU) to Buy in late August.  Today, they reiterated their Outperform rating and $58 price target on Alaska Air Group (ALK), writing that the company continues to post solid results despite a difficult macro environment—a fact that the market isn’t fully valuing.

  • [By Ben Levisohn]

    One of the catalysts for the relative outperformance of JetBlue’s (JBLU) share price in recent months has been the idea that the more its financial performance disappoints, the more likely and more aggressive it will be at implementing a more “shareholder-friendly” fee/seat densification strategy – we believe this could apply to Southwest in the future…

  • [By Ben Levisohn]

    August was the third straight month of underwhelming PRASM results from Delta Air Lines. Perhaps not coincidentally Alaska Air and JetBlue (JBLU) have been underperforming industry PRASM lately as well, two airlines defending themselves against Delta Air Lines. To be sure, Delta Air Lines’ PRASM is still growing faster than its CASM, which means margins are expanding y/y, but the rate of margin change is likely to be “less good” relative to United Continental (UAL) and American Airlines (AAL) due to Delta Air Lines’ capacity choices. We like Delta Air Lines, just not as much as most other Outperform-rated airlines.

Hot Airline Companies To Watch In Right Now: American Airlines Group Inc (AAL)


American Airlines Group Inc., formerly AMR Corporation, incorporated in October 1982, operates in the airline industry. The Company’s principal subsidiary is American Airlines, Inc. (American). As of December 31, 2011, American provided scheduled jet service to approximately 160 destinations throughout North America, the Caribbean, Latin America, Europe and Asia. AMR Eagle Holding Corporation (AMR Eagle), a wholly owned subsidiary of the Company, owns two regional airlines, which do business as American Eagle-American Eagle Airlines, Inc. and Executive Airlines, Inc. (collectively, the American Eagle carriers). American also contracts with an independently owned regional airline, which does business as AmericanConnection (the AmericanConnection carrier). As of December 31, 2011, AMR Eagle operated approximately 1,500 daily departures, offering scheduled passenger service to over 175 destinations in North America, Mexico and the Caribbean.


American, AMR Eagle a nd the AmericanConnection airline served more than 250 cities in approximately 50 countries with, on average, 3,400 daily flights and the combined network fleet numbered approximately 900 aircraft as of December 31, 2011. American Airlines is also a founding member of the oneworld alliance, which includes British Airways, Cathay Pacific, Finnair, LAN Airlines, Iberia, Qantas, JAL, Malev Hungarian, Mexicana, Royal Jordanian and S7 Airlines. Together, oneworld members serve 750 destinations in approximately 150 countries, with about 8,500 daily departures. American is also one of the scheduled air freight carriers in the world, providing a range of freight and mail services to shippers throughout its system onboard American’s passenger fleet.


To improve access to each other’s markets, American has established marketing relationships with other airlines and rail companies. As of December 31, 2011, American had marketing relationships with Air Berlin, Air Pacific, A ir Tahiti Nui, Alaska Airlines, British Airways, Cape Air, C! athay Pacific, China Eastern Airlines, Dragonair, Deutsche Bahn German Rail, EL AL, Etihad Airways, EVA Air, Finnair, GOL, Gulf Air, Hawaiian Airlines, Iberia, Japan Airlines (JAL), Jet Airways, JetStar Airways, LAN (includes LAN Airlines, LAN Argentina, LAN Ecuador and LAN Peru), Niki Airlines, Qantas Airways, Royal Jordanian, S7 Airlines, and Vietnam Airlines.


American has established the AAdvantage frequent flyer program (AAdvantage). AAdvantage members earn mileage credits by flying on American, American Eagle and the AmericanConnection carrier or by using services of other participants in the AAdvantage program. Mileage credits can be redeemed for free, discounted or upgraded travel on American, American Eagle or other participating airlines, or for other awards. American sells mileage credits and related services to other participants in the AAdvantage program. There are over 1,000 program participants, including a credit card issuer, hotels, car rental co mpanies, and other products and services companies in the AAdvantage program. As of December 31, 2011, AAdvantage had approximately 69 million total members.

The Company competes with Alaska Airlines (Alaska), Delta Air Lines (Delta), Frontier Airlines, JetBlue Airways (JetBlue), Hawaiian Airlines, Southwest Airlines (Southwest) and AirTran Airways (Air Tran), Spirit Airlines, United Airlines (United) and Continental Airlines (Continental), US Airways and Virgin America Airlines.

Advisors’ Opinion:

  • [By Ben Levisohn]

    American Airlines (AAL) said it reached a tentative agreement with its flight attendants on Friday. The market doesn’t seem thrilled, however, as shares of American Airlines have dropped more than 2%.

    Credit Suisse analysts Julie Yates and Krishna Vege think investors are “missing the forests for the trees” when it comes to American Airlines:

    Following Friday’s tentative agreement with the Flight Attendant union and recent company discussions, we accelerate labor inflation for Flight Attendant & Pilot groups to 2015 from 2016. No details have been disclosed, but APFA indicated the agreement contains the highest wages and best work rules of any network carrier which is not a surprise since American Airlines management preferred fixed increases to profit sharing and is committed to strong labor relations. Healthy labor relations are key to executing the integration, so we see the swift pace of the flight attendant agreement as a positive and expect pilot negotiations will be similarly harmonious.

    For investors willing to wait out well-telegraphed near-term PRASM headwinds and downward adjustments to consensus as labor escalation is pulled forward in 2015, we think the QTD
    sell off of 15% offers an attractive entry point. Shares are trading at just 8x our 2015E when fully taxed and American Airlines stands to benefit the most in a declining fuel-price environment given the absence of hedging.

    Shares of American Airlines have dropped 2.5% to $36.70 at 2:03 p.m. today, though it’s not the only airline getting pounded. United Continental (UAL) has fallen 3.1% to $47.83 and Delta Air Lines (DAL) has declined 1.6% to $38.03.

  • [By Ben Levisohn]

    Airlines stocks are facing turbulence today after Merrill Lynch downgraded JetBlue (JBLU) to Underperform from Neutral. Delta Air Lines (DAL) American Airlines (AAL), United Continental (UAL) and Southwest Airlines (LUV) have all dropped today.

  • [By Ben Levisohn]

    August was the third straight month of underwhelming PRASM results from Delta Air Lines. Perhaps not coincidentally Alaska Air and JetBlue (JBLU) have been underperforming industry PRASM lately as well, two airlines defending themselves against Delta Air Lines. To be sure, Delta Air Lines’ PRASM is still growing faster than its CASM, which means margins are expanding y/y, but the rate of margin change is likely to be “less good” relative to United Continental (UAL) and American Airlines (AAL) due to Delta Air Lines’ capacity choices. We like Delta Air Lines, just not as much as most other Outperform-rated airlines.

  • [By Ben Levisohn]

    We expect domestic [available seat miles, or] ASMs, to increase below 3%, led by a 4-5% growth rate from Southwest Airlines (LUV). We expect Southwest Airlines will grow its seat count in the 2-3% range, with the difference coming from longer stage length flying. We believe United Continental (UAL) will continue to trim domestic capacity slightly as management downgauges 757s to 737-900ERs and rapidly puts down its 50-seat fleet. We expect modest growth from Delta Air Lines (DAL) and American Airlines (AAL) due to upgauging of domestic aircraft and as Delta Air Lines grows in Seattle and American Airlines defends its Dallas/Fort Worth International Airport hub from Southwest Airlines’ Wright Amendment flying. We’re ok with all of that.