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Investors concerned over oil prices, TAM reports improved traffic results


North and South American airlines stocks were mixed on Thursday (15-Oct-2009), with investors showing their concern in another increase in oil prices (+3.2%), to USD77.58.

See related report: Oil soars above USD77 per barrel

Stocks were further dragged down by Southwest’s release of its 3Q2009 financial results. As a result, the AMEX Airline Index was down 1.2% at the end of trading. The Dow meanwhile gained 0.5%. 

Southwest reports net loss of USD16 million for 3Q2009

Southwest (-5.7%) stocks took the biggest fall, following the release of its 3Q2009 financial results. The carrier narrowed its losses for the quarter, reporting a net loss of USD16 million, or USD0.02 loss per diluted share, compared to a net loss of USD120 million, or USD0.16 loss per diluted share, for 3Q2008. Southwest attributed the loss to its fuel hedges and early retirement programme.

Standard & Poor’s Rating Services decreased its long-term rating of the carrier from 'BBB-plus' to 'BBB', noting its 1H2009 results were worse than peer results for the period. Its outlook for Southwest remains 'negative'.

UBS raises ratings on Air Canada and WestJet

UBS raised its rating of Air Canada (-1.4%) and price target for WestJet (-0.9%) early in trading. The analysts raised their rating of Air Canada from 'Sell' to 'Neutral', due to “easing liquidity concerns”, while its price target was increased from CAD0.50 (USD0.49) to CAD1.50 (USD1.46). WestJet’s price target was meanwhile raised from CAD14 (USD13.60) to CAD15 (USD14.57).

TAM rises on back of improved Sep-2009 traffic

TAM (+1.4%) stocks rose on the back of improved Sep-2009 traffic results. According to the Brazilian carrier, the domestic market was strongly stimulated during the month as a result of "competitive dynamics". Traffic (RPKs) rose 8.6% year-on-year, while domestic capacity (ASMs) grew by 7.4%, resulting in a 0.8 ppts increase in load factor, to 65.4%. According to TAM, during the month, industry demand grew 29.9%, while supply increased 19.9%. The carrier’s domestic market share (RPK) was 44.1% for the period.

The competitive environment impacted TAM’s domestic yield for the quarter, declining between 5% and 10%, compared to 2Q2009. However, TAM stated that it observed a "slight tariff recovery" in the first weeks of Oct-2009, in comparison to Sep-2009.

In the international market, TAM achieved a 15% increase in traffic, while capacity grew 21.4%, leading to a 4.3 ppts fall in load factor, to 76.1%. However, this was 2.4 ppts above the market average, which was 73.7%. The carrier’s international market share for Sep-2009 was 87.3%.

In terms of international yields, TAM estimated a 10% to 15% increase, compared with the preceding quarter.

North & South America selected airlines daily share price movements (% change): 15-Oct-09

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