Hawaiian Airlines slumps on analyst downgrade; Alaska Air increases baggage fees

North and South American airline stocks declined on Wednesday (16-Jun-2010) after FedEx warned it is expecting higher costs to constrain earnings for FY2011. The Dow was flat as a result, with comments from FedEx outweighing optimism after Apple reported higher-than-expected sales of its new iPhone.

A rise in oil prices (+1.0%), to USD77.67, also pushed airline stocks lower for the day.

Hawaiian Airlines slumps on analyst downgrade

Hawaiian Airlines' (-9.7%) shares plummeted after Avondale Partners downgraded its rating of the carrier’s stock from "Market Outperform" to "Market Perform". The analysts also cut Hawaiian’s price target from USD14 to USD8. The carrier ended trading at USD6.34.

However, Jesup & Lamont equity analyst, Helane Becker, reiterated a "Buy" rating for the carrier during trading, with an USD11 price target.

Hawaiian Airlines stated the day prior that it expects revenue per ASM (RASM) to improve by 6.5% to 8.5% compared with 2Q2009, with the expected range of improvement slightly below previous expectations of 8-11%. Cost per ASM (excluding fuel) is expected to increase by 3.5% to 5.5% for the quarter, which is lower than the carrier's expected 5-8% increase.

See related CAPA Profile: Financial Results

FedEx expects constrained revenue growth for FY2011

FedEx (-6.0%) also slumped after the freight carrier stated it expects growth in earnings in fiscal 2011 to be constrained by significant increases in fixed pension and volume-related aircraft maintenance expenses, along with higher-than-anticipated healthcare costs. In addition, its earnings guidance includes increased costs related to the planned reinstatement of various employee compensation programmes.

More positively, the carrier reported an improvement in net profit for the three months ended 31-May-2010 totalling USD419 million, compared with a loss of USD876 million in the previous corresponding period. Operating profit also improved, rising to USD696 million, compared with a loss of USD849 million in the previous corresponding period.

For the 12 months ended 31-May-2010, net profit was USD1,184 million, compared with a net profit of USD98 million in the previous corresponding period. See related report: Hong Kong Airport sets new cargo traffic record, FedEx sees surging Asian exports

Alaska Air increases baggage fees

Alaska Air (+2.0%) was the day’s biggest gainer. Alaska Airlines and Horizon Air announced plans to charge passengers USD20 for each of their first three checked bags. This represents a USD5 increase for the first checked bag, a USD5 decrease for the second, and a USD30 decrease for the third. In addition, the airlines cut the cost of the fourth through 10th checked bag from USD100 per bag to USD50.

See related CAPA Profile: Ancillary Revenues

Horizon Air meanwhile announced plans to decrease frequencies and discontinue services on select routes for its Autumn 2010 schedule, effective 22-Aug-2010. Details include:

  • Seattle-Pasco, Seattle-Vancouver: to be reduced by one flight;
  • Seattle-Kelowna: to be reduced by one flight, but to be reinstated during winter 2010-11 schedule;
  • Boise-Los Angeles, Boise-Idaho Falls, Flagstaff/Prescott-Los Angeles, Eureka/Redding-Seattle, Redmond-Los Angeles, and Sacramento-Santa Barbara to be suspended.

See related CAPA Profile: Route Changes

North & South America selected airlines daily share price movements (% change): 16-Jun-2010