The 4Q15 earnings season is almost over and all major airlines have reported their earnings for the quarter. So it is now time to find out which airlines fared better than the others.
Stock price movement
In 4Q15, the stocks of most legacy players outpaced those of regional carriers. Delta Air Lines’ stock saw its price rise by about 13% during the three months of the last quarter. American Airlines (AAL) and United Airlines (UAL) also saw gains of 9% and 8%, respectively, while Alaska Air Group (ALK) increased by 1%.
Among regional players, only Southwest Airlines (LUV) saw gains of ~13% in 4Q15. All other regional players declined. Spirit Airlines (SAVE) declined by 16%, JetBlue Airways (JBLU) fell by 12%, and Allegiant Travel (ALGT) lost ~22%. Declining passenger yields and capacity utilizations have been a concern for the airline industry amid fears of overcapacity. However, where legacy carriers have planned capacity cuts to address these issues, regional players have continued to expand capacity aggressively. The intense price war of 2015 added to investor concerns in 4Q15.
Because air travel is subject to discretionary spending, it makes sense to compare the airline industry performance to the consumer discretionary sector. This sector, tracked by the Consumer Discretionary SPDR ETF (XLY), also rose by 5% during the fourth quarter. The broader market, tracked by the SPDR S&P 500 ETF (SPY), was up by about 6% in the same timeframe. Investors can gain exposure to airline stocks through the SPDR S&P Transportation ETF (XTN).
The airlines we will cover in this series are the four major legacy players American Airlines (AAL), United Continental Holdings (UAL), Delta Air Lines (DAL), and Alaska Airlines (ALK), as well as regional players Southwest Airlines (LUV), JetBlue Airways (JBLU), and Allegiant Travel (SAVE).