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Airline Stock Roundup: Activist Stake in LUV, Rosy May Traffic at CPA & More

In the past week, Southwest Airlines LUV grabbed headlines when Elliott Investment Management built a stake of approximately $1.9 billion in it. The activist investor aims to revamp LUV’s board following its unsatisfactory performance of late.  Elliott is also demanding a change at the helm for LUV.

Alaska Airlines, the wholly-owned subsidiary of Alaska Air Group ALK,was in the news owing to an update on its summer schedule. Delta Air Lines’ DAL management announced that it would soon start selling Premium Select seats on New York-Los Angeles flights, in a bid to meet the increasing demand for premium travel experience. Copa Holdings’ CPA May traffic report was impressive owing to an upbeat air-travel demand scenario. United Airlines UAL has decided to add more flights for political conventions.

Recap of the Recent Most Important Stories

1 Southwest Airlines’ CEO Bob Jordan stated that he has no plans to quit his job amid the growing pressure from Elliott. In a letter to LUV’s board, Elliott Investment Management stated that the stock has plummeted in excess of 50% over the past three years due to leadership woes. Elliott believes that LUV’s share price can reach $49 per share within 12 months, representing a return of 77% during the period. To reach those heights, Elliott suggests enhancing the board, upgrading leadership and undertaking a thorough business review.

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2. Alaska Air is expanding its network by introducing new routes as it offers the largest summer schedule in its history, in anticipation of the busy summer season ahead.  The airline is also making other arrangements like increasing the number of daily flights in its network that fly to popular destinations. Some of the steps taken by ALK to meet the anticipated buoyant demand scenario include the introduction of nearly 10% more flights to favorite destinations and the operation of new nonstop routes connecting Anchorage and New York, Portland and Nashville, and San Diego with both Atlanta and Anchorage. The airline is also growing its presence in Los Angeles.

3 To upgrade the travel experience of passengers, Delta will initially start offering an international-style premium economy service from Sep 10 on four of its 11 peak-day flights between New York's John F. Kennedy International Airport and Los Angeles International Airport. It will use Boeing 767 widebody planes to operate on this route. The airline will expand this premium economy service to additional daily JFK-LAX frequencies later this year. Delta Premium Select offers passengers more space to stretch out and relax with a wider seat and additional recline apart from offering an adjustable footrest and leg rest.

DAL was in the news recently when it resumed flights to Tel Aviv following a COVID-induced hiatus. The story was covered in detail in the previous week’s write-up.

Delta currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

4. In May, Copa Holdings reported an 8.7% increase in revenue passenger miles (a measure of traffic). Available seat miles (a measure of capacity) increased 7.2% year over year. With traffic growth outpacing the capacity decline, the load factor (percentage of seats filled by passengers) increased to 87.3% from 86.1% in May 2023.

5. United Airlines is set to contribute politically by increasing its capacity. To this end, United Airlines announced the addition of almost 200 new flights to make traveling smoother and hassle-free for political enthusiasts and convention attendees during this summer's national political conventions. United Airlines is increasing its Milwaukee flying by more than 75% for the Republican National Convention in July.

Performance

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

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The table above shows that most airline stocks traded in the red over the past week. The NYSE ARCA Airline Index decreased 1.4% to $58.28. Over the course of the past six months, the NYSE ARCA Airline Index decreased 9.4%.

What’s Next in the Airline Space?

Investors would eagerly await further updates on LUV’s activist investor saga. With air travel demand likely to hit the roof during the summer season, updates on airlines boosting capacity to meet the anticipated demand swell cannot be ruled out.

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

United Airlines Holdings Inc (UAL) : Free Stock Analysis Report

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

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

Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report

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