Which Direction For Airline Stocks?

by: Robert Zenilman

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Airlines Watch for Terror-Plot Effect

  • Summary: After last month's airplane terror plot was discovered in Britain, there was understandable concern on its effect on passenger bookings. Impact so far has been minimal, but some troubling signs are starting to appear. Despite almost 1,300 flights being canceled due to the terror threat, British Air's (NYSEARCA:BAB) August traffic was up 5% compared to the same period last year (last year's traffic was impacted by labor problems). Since then, however, bookings are running lower compared with recent months. Virgin Atlantic said that they have not seen any "long-term impact" to their business (no furter elaboration was given). To "stimulate the market", discount carrier Ryanair (NASDAQ:RYAAY) recently announced the availability of 4 million seats for the price of (only) taxes and fees. Continental's (NYSE:CAL) August passenger traffic rose 9.3%, filling 82.4% of its seats. Blaming increased security costs, Continental revenue-per-available-seat-mile rose about 7% compare to last year. This follows a 9.6% increase in July. American's (AMR) August load factor was 81.9%, with traffic down 1.4%, which can be partially explained by a 1.9% decline in the number of available seats.
  • Comment on related stocks/ETFs: Airlines just cannot seem to get a break. Just when things were looking up for the sector, another event threatens to disrupt their business. Aside from legacy carriers, it looks like budget carriers are feeling the heat as well.