Airline Stock Roundup: LUV’s Tentative Labor Deal, DAL’s Fleet Upgrade & More


In the past week, Southwest Airlines (LUV Quick QuoteLUV ) inked a pay-related provisional deal with the International Association of Machinists and Aerospace Workers (IAM), the union covering more than 5000 customer-service employees of this Dallas-based carrier.

Delta Air Lines (DAL Quick QuoteDAL ) was also in news, courtesy of its fleet-upgrade exercise. The Atlanta-based carrier placed an order to Airbus for 30 additional A321neo jets. Once the new planes join Delta’s fleet, those will be mainly deployed to serve its domestic network.

Alaska Air Group’s (ALK Quick QuoteALK ) subsidiary Alaska Airlines is also looking to expand its fleet as air-travel demand surpasses the year-ago levels despite the Delta variant scare. To this end, Alaska Air already exercised the option of acquiring 12 more Boeing 737-9 jets, earlier than planned. The story was reported in detail in the previous week’s write up.

Recap of the Past Week’s Most Important Stories

1. The provisional agreement between the currently Zacks Rank #3 (Hold) Southwest Airlines, with IAM was reached after long-standing negotiations. It is related to increase in wages and other benefits for the above employees. However, there is a long way to go before the new contract becomes effective. We note that tentative agreements do not necessarily mean that the deal will be operational. The provisional deal inked by Southwest Airlines will be voted upon by union members. It will be implemented only if the voting result is favorable. The IAM negotiating committee is working diligently to finalize the tentative agreement.

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

2. Per a CNBC report, American Airlines’ (AAL Quick QuoteAAL ) August revenues are coming in below its expectations due to a fresh spike in coronavirus cases. While the company’s July revenues were above its expectations, the rise in COVID-19 cases weakened near-term bookings and increased cancellations in August. However, the carrier’s end-of-year holiday bookings are strong. Due to “the fluidity of the current demand environment”, the airline does not plan to make adjustments to its capacity or revise its guidance at the moment. On business travel recovery, the carrier’s chief revenue officer Vasu Raja said that demand is expected to be restored, albeit at a slower pace than what was previously experienced.

3. The first of the 30 A321 neo jets ordered by Delta is expected to bedelivered in the first half of 2022. Deliveries of the remaining planes will continue through 2027. These planes are powered by next-generation Pratt & Whitney PW1100G turbofan engines.The jets are highly fuel-efficient.

4. In a bid to further boost air-travel demand for leisure in the United States, Allegiant Travel Company (ALGT Quick QuoteALGT ) launched a new loyalty program called Allways Rewards. Members of Allways Rewards will receive one point for every dollar spent at and two points per dollar on spending more than $500 (excluding taxes and fees). Points redeemable at .01 per point can be used just 72 hours after travel on Allegiant. There are no blackout dates, usage fees or minimum requirements for redemption of points. For members who travel with Allegiant within 24 months, points will have no expiration.

5. Per  Ryanair Holdings’ (RYAAY Quick QuoteRYAAY ) CEO Michael O’Leary, the carrier is on track to achieve its current-month guidance with respect to passengers to be transported, backed by strong booking trends. This was mentioned in a recent Reuters report. In July, while reporting first-quarter fiscal 2022 (ended Jun 30, 2021) results, this Irish low-cost airline had predicted that it will carry more than 10 million passengers in August. With bookings continuing to be impressive, the CEO is naturally upbeat on the prospects of matching that outlook.


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

Zacks Investment Research
Image Source: Zacks Investment Research

The table above shows that all airline stocks have traded in the green in the past week, leading the NYSE ARCA Airline Index to surge in excess of 100% to $93.36. Stocks were buoyed by the FDA’s decision to grant full U.S. approval to Pfizer (PFE Quick QuotePFE ) /BioNTech’s (BNTX Quick QuoteBNTX ) coronavirus vaccine. However, over the course of the past six months, the NYSE ARCA Airline Index has depreciated 11.2%.

What’s Next in the Airline Space?

Further updates on the impact of the Delta variant on air travel is expected in the coming days.


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