Airline Stock Roundup: LUV’s Tentative Labor Deal, CPA’s Traffic Report & More

In the past week, Southwest Airlines LUV received encouraging news on the labor front when it reached a provisional agreement with the union that represents more than 17,000 of its ramp, operations, provisioning and cargo employees.

Meanwhile, Copa Holdings’ CPA traffic report for July was impressive owing to the post-pandemic surge in air travel demand. Owing to the uptick in passenger volumes, European carrier Ryanair Holdings RYAAY anticipates carrying a higher number of passengers in the current month than in July. If the expectation materializes, RYAAY would establish a new monthly traffic record.

Recap of the Past Week’s Most Important Stories

1. The provisional deal inked between LUV’s management and the Transport Workers Union Local 555 or TWU 555 provides substantial wage increase, better retirement and other benefits to the concerned employees.  The deal will materialize only if it is approved through the ratification voting process. The details of LUV’s current agreement and voting timeline will be directly communicated to Southwest Airlines’ members by TWU 555.

2. In July, revenue passenger miles (a measure of traffic) rose in double digits, i.e., 12.5% on a year-over-year basis at CPA. To match the demand swell, CPA is increasing its capacity. In July, available seat miles (a measure of capacity) increased 9.9% year over year. With traffic growth outpacing capacity expansion, the load factor (percentage of seats filled by passengers) improved to 89% from 87% in July 2022.

Copa Holdings was also in the news when it reported better-than-expected earnings per share and revenues for second-quarter 2023. The news was covered in the previous week’s write up.

3. According to a Reuters report, Irish carrier Ryanair Holdings expects to carry more passengers in August than the actual figure in July. We remind investors that Ryanair carried 18.7 million passengers in July, which itself is a record. The load factor (% of seats filled by passengers) in July was as high as 96%.

Per Eddie Wilson, the head of Ryanair DAC, the largest airline in the group, “It should be slightly more (than July) … people are still travelling.” Healthy booking trends have resulted in the upbeat expectation. Ryanair has been benefiting from the stronger-than-expected recovery in air travel demand from the pandemic lows.

Currently, RYAAY carries a Zacks Rank #3 (Hold).

4.  In a bid to meet  the strong recovery in international travel in the post-pandemic scenario, Delta Air Lines DAL has decided to expand its flight schedule to China. To this end, this Atlanta-based carrier has decided to operate 10 weekly flights to the Shanghai-Pudong International Airport from its hubs in Seattle and Detroit hubs this winter. From Oct 29, the airline will operate daily flights from Shanghai and three-times-a-week flights from Detroit. Moreover, Delta intends to resume four-times-weekly flights to the Shanghai-Pudong International Airport from Los Angeles. DAL has not operated on the route since early 2020.

According to a Reuters report, American Airlines AAL has also decided to expand its China operations. The carrier has decided to commence daily flights from Dallas-Fort Worth to Shanghai-Pudong International Airport from January 2024.

Price Performance

The NYSE ARCA Airline Index declined 5.9% over the period to $63.51. Over the course of the past six months, the sector tracker has increased 3.8%.

What’s Next in the Airline Space?

Stay tuned for the usual news updates in the space.
Ryanair Holdings PLC (RYAAY): Free Stock Analysis Report

Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

Southwest Airlines Co. (LUV): Free Stock Analysis Report

Copa Holdings, S.A. (CPA): Free Stock Analysis Report

American Airlines Group Inc. (AAL): Free Stock Analysis Report

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