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Why Delta Air Lines’s July 2016 Metrics Left Investors Wary

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US airline stocks

US airline stocks tumbled on Tuesday, August 3, following Delta Air Lines’s (DAL) weak operational metrics for July 2016. DAL reported a 7% year-over-year (or YoY) decline in its passenger revenue per available seat mile (or PRASM) numbers for July 2016.

Increasing competition, combined with an oversupply situation in the industry, led to lower airfares and low yields.

Delta Air Lines’s numbers have increased the fear among investors of a similar situation being repeated across the industry. Investors’ anxiety worsened after the Centers for Disease Control and Prevention issued a travel alert in the Miami area due to the Zika virus scare. As a result, airline stocks recorded their second highest decline on August 2.

In July, US airline stocks recorded their highest gain in more than a year.

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Stock decline

Delta Air Lines (DAL) reported the highest decline of 7.8%. DAL was followed by JetBlue Airways’s (JBLU) 6.5% decline, United Continental’s (UAL) 6.3% decline, and American Airlines’s (AAL) 5.9% decline.

Spirit Airlines (SAVE) fell by 4.9%, Alaska Air Group (ALK) fell by 4%, Southwest Airlines (LUV) fell by 4%, and Allegiant Travel (ALGT) fell by 3.9%.

Year-to-date performance

Year-to-date (or YTD) numbers also present a gloomy report. Again, Delta Air Lines has been the biggest loser, along with Allegiant Travel, with both airlines both losing almost 29% YTD.

JetBlue Airways came in third with a 26% loss, followed by United Continental with a 23% loss. American Airlines lost 22%, Alaska Air Group lost 20%, and Southwest Airlines lost 18%. Spirit Airlines, which was in the green until mid-July, also went into the red, losing almost 4% YTD on August 2, 2016.

The broader market index (SPY) is up by 4.7% YTD.

In this series, we’ll analyze Delta’s operational numbers in detail. We’ll also assess what this would mean for DAL’s 3Q16 performance and gauge the situation in the industry.

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