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AMEX Airline Index up on positive load factors for Sep-2009; United's stock upgraded

6-Oct-2009

The AMEX Airline Index ended trading up 1.1% on Monday (05-Oct-09), assisted by Sep-2009 traffic results that suggest demand may finally have bottomed out.

Southwest slips following downgrade

Southwest (-1.3%) slipped during trading after Raymond James & Associates downgraded the carrier’s stock rating from “Market Perform” to “Outperform”.

United stocks upgraded

Analysts were more positive about United Airlines (+1.3%), following an announcement it has priced its underwritten registered public offerings of common stock and convertible senior notes. The carrier stated it has agreed to sell 19 million shares of its common stock at a public offering price of USD7.24 per share. The company has also granted the underwriters an over-allotment option with respect to an additional 2.85 million shares of its common stock on the same terms and conditions to cover over-allotments, if any.

United also announced the pricing of USD300 million aggregate principal amount of convertible senior notes due 2029. The carrier has granted the underwriters an over-allotment option with respect to an additional USD45 million aggregate principal amount of convertible senior notes on the same terms and conditions to cover over-allotments, if any. The convertible senior notes will pay interest semi-annually at an annual rate of 6.0%.

As a result, analysts at Stifel Nicolaus increased its rating for United from “Hold” to “Buy”, also setting an USD11 price target. The analysts believe the carrier will earn between USD300 million and USD350 million and improve its liquidity as a result of the offering.

Fitch Ratings has meanwhile assigned a rating of “C/RR6” to the carrier’s convertible note issue. The Issuer Default Rating (IDR) for both UAL and United is “CCC”.

Carriers report Sep-2009 traffic results

  • United reported a 2.9% reduction in passenger traffic for Sep-2009, to 6.6 million passengers. Traffic (RPMs) was down 1.1% for the month, while capacity (ASMs) was reduced by 3.7%, leading to a 2.1 ppts improvement in load factor, to 81.2%;
  • US Airways (+0.9%) reported a 6.4% decrease in traffic for the period, to 3.8 million passengers. Traffic was down 1.6% for the month, while capacity was reduced by 0.6%, leading to a 0.8 ppts drop in load factor, to 78.8%;
  • American Airlines (+0.1%) meanwhile reported a 3.7% fall in passenger traffic, to 6.5 million passengers. Traffic was down 3.5% for the month, while capacity was reduced by 6.9%, leading to a 2.8 ppts increase in load factor, to 79.4%;
  • Hawaiian Airlines (+2.0%) reported the most improved passenger traffic result, with a 14.9% increase in passenger traffic, to 683,829 passengers. Traffic was up 8.1% for the month, while capacity was also up by 3.1%, leading to a 3.8 ppts improvement in load factor, to 83.8%;
  • Alaska Airlines’ (+2.3%) traffic for the month was not as impressive, with a 9.5% fall in passenger traffic. However, load factor did improve, up 1.7 ppts on the back of a 4.1% fall in traffic and a 6.2% reduction in capacity, to 77.9%;
  • Air Canada (-2.2%) saw a decline in load factor by 0.2 ppts, to 79.7%, on the back of a 2.1% decrease in traffic and a 3.2% reduction in capacity;
  • AirTran, Allegiant, GOL and WestJet also reported their Sep-2009 results.

North & South America selected airlines daily share price movements (% change): 05-Oct-09


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