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Airline Stock Roundup: AAL Opts for Federal Loans, DAL Delays Pilot Furloughs

In the past week, American Airlines AAL announced its decision to avail of loans from the United States Department of the Treasury. Notably, this Fort Worth, TX- based carrier is eligible to borrow up to $5.5 billion from the Treasury.

Meanwhile, with no confirmation of a second round of stimulus from the government available yet, airlines are devising ways and means to protect jobs following the expiry of the current package tomorrow. Updates in this respect were provided by the likes of Delta Air Lines DAL and United Airlines UAL in the past five trading days.

Further, an expansion-related update was issued from JetBlue Airways JBLU as travel demand for leisure improves.

Flashback to the Past Week’s Key Events

1.    Following the decisions of Delta and Southwest Airlines LUV not to avail of federal loans, American Airlines is now permitted to borrow up to $5.5 billion, reflecting an increase of 15.8% from its initial allocation. American Airlines, currently carrying a Zacks Rank #3 (Hold), already borrowed $550 million of the stipulated amount, backed by its loyalty program as it aims to lower its debt levels. The upper limit may further increase to $7.5 billion next month, subject to the Treasury’s final nod.

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

2.    Per a CNBC report, Delta will delay its decision to furlough pilots until Nov 1 as the company negotiates cost-cutting measures with the pilots’ union. According to a statement by the pilots’ union Air Line Pilots Association, “This move will provide time as we continue to lobby for a clean extension of the CARES Act and the Payroll Support Program and resume our negotiations with Delta”.

3.    Going by a CNBC report, a cost-cutting deal was reached between United Airlines and the union representing its pilots (Air Line Pilots Association). The deal saves the jobs of nearly 3,000 pilots through at least June 2021. Notably, the union’s leaders had previously voted in favor of the deal as mentioned in the previous week’s write-up. Even though the jobs of pilots were sustained, this Chicago-based carrier still has plans to lay off approximately 13,000 employees starting next month in the absence of any more federal aid.

4.    JetBlue aims to add four non-stop services to its latest expansion-related initiative. These new routes will connect Bradley International Airport to Los Angeles, Las Vegas, San Francisco and Cancún, Mexico. The extension of its schedule will lift JetBlue as the largest carrier in Connecticut by 2021. Through this move, the airline aims to generate additional revenues and bring back some temporarily parked aircraft into service, which will boost flying opportunities for its crew members.

5. Hawaiian Airlines, the wholly-owned subsidiary of Hawaiian Holdings HA offered its passengers at some of the U.S. mainland gateways the facility of COVID-19 tests, thereby bypassing the 14-day quarantine requirement of the state of Hawai‘i upon arrival. The carrier, through its partnership with Worksite Labs, arranged this facility of drive-through PCR testing ($90 for results within 36 hours or $150 for day-of-travel express service) from a select few laboratories.

United Airlines also launched a COVID-19 pilot-testing program to make it convenient for customers to travel to destinations that have quarantine mandates upon arrival

Performance

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




The table above shows that majority of the airline stocks have traded in the green over the past week, even though the gains were muted in nature, thus leading the NYSE ARCA Airline Index to appreciate marginally to $57.61. However, during the course of the past six months, the NYSE ARCA Airline Index has gained 19.8% owing to impressive upsides at the likes of Gol Linhas,  Spirit Airlines and Alaska Air .

What’s Next in the Airline Space?

Investors keenly await September traffic reports from carriers like Ryanair Holdings RYAAY. More corona virus-related updates and the resultant impact on air travel will also be on investors’ watchlist.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
 
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