This Is Why Airline Stocks Have A Tailwind Today – Investor's Business Daily

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American Airlines (AAL) on Wednesday hiked its second-quarter forecast for unit revenue and adjusted pretax margin, propelled in part by stronger travel demand in the U.S. and Latin America.

XAutoplay: On | OffThe more optimistic outlook follows a similar one last week from Delta Air Lines (DAL), which cited “commercial initiatives and an improving revenue environment.” United Airlines (UAL) after the close on Tuesday also offered a solid Q2 unit-revenue forecast.

Airline stocks were active on the news from American and United, along with the strong overall market. American rose 4.2% to 53.80 in the stock market today. Delta, which reports second-quarter earnings on Thursday, climbed 2.2% to 55.48.

United, which reports Tuesday, jumped 4.7% to 80.53, moving back above its 50-day line. United is in a short flat base just above a prior consolidation. The potential buy point is 83.14.

Southwest (LUV) rose 0.4% to 62.08. Southwest reported June traffic figures earlier this week as well, sticking with its Q2 unit revenue targets.

Separately, Panama-based Copa Holdings (CPA) rose 3.4% to 129.12, breaking out of a cup base with a 125.87 buy point.

American said it expected second quarter unit revenue, or airline revenue as it relates to its overall seating capacity and flight coverage, to increase roughly 5%-6%. That’s an improvement from an earlier forecast of a 3.5%-5.5%.

The carrier said the brighter picture for unit revenue was helped largely by higher passenger yields — a measure of an airline’s ability to charge passengers more for tickets — particularly in the U.S., Central and South America, and the Caribbean regions.

American also said it expects adjusted pretax margin to be 13%-14%, better than an earlier view for 12%-14%. Unit costs excluding fuel and other items were expected to rise roughly 7% during the second quarter, largely because of salary and benefit hikes given to pilots, flight attendants and other staff.

For the month of June, American’s passenger traffic rose 0.8%. Capacity rose 1.1% and load factor fell 0.2 percentage points to 84.7 %.

Demand for air travel has generally improved since the U.S. election in November, helping to push unit revenue higher. The major network carriers have also found more ways to break out costs, offering both “basic economy” seating classes to compete with low-cost carriers and more lucrative premium fare options.

Alaska Air Group (ALK), the carrier that bought Virgin America in December, said on Wednesday that it expected second-quarter passenger unit revenue to rise around 3.5%. That figure factored in “historical results” for the two carriers from last year’s Q2, which took place before the acquisition closed.

Shares gained 3.3% to 94.63.


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