Ugly falls for US Air and United; Continental; GOL up on broker support

North and South American carriers’ stocks tumbled on Tuesday (01-Sep-09), as the Dow (-2%) declined. An early rebound in oil prices was a negative for airlines, even though oil ended trading 2.7% down, at USD68.05 The AMEX Airline Index plunged (-5%).

US Airways (-11.8%) and United Airlines (-8.4%) again led the fall. Fellow legacy carrier, American Airlines (-4.2%) was also down on the back of plans to cut 921 flight attendant jobs, effective 01-Oct-09, suggesting American is still seeking ways to survive the global financial downturn. The carrier plans to furlough 228 staff and place 244 on leave for two months, while a further 449 will take voluntary options, including leave. Almost half of the attendants to be furloughed will be from New York La Guardia Airport.

Continental Airlines (-5.7%) announced after trading a 6.1% fall in passenger traffic for Aug-2009, to 5.9 million passengers. Traffic (RPMs) fell 3.9%, on a 6% reduction in capacity, leading to a load factor of 85.8%, up 1.9 ppts. The carrier estimated RASM to have decreased between 16.5% and 17.5% year-on-year, while mainline RASM is estimated to have decreased between 17% and 18%. For Jul-2009, consolidated passenger RASM decreased 17.4% year-on-year, while mainline passenger RASM decreased 18.3%.

Southwest (-1.8%) slipped, prior to announcing after trading that it has reached a resolution with the FAA, under which Southwest will replace certain parts on flap exhaust gate assemblies on 82 of its B737-300/500 aircraft by 24-Dec-2009. The carrier also published a new schedule during the day, covering the 09-Jan-2009 to 12-Mar-2009 period, aimed at better accommodating the decline in air traffic demand and seasonal Winter demand levels.

Competitor Allegiant (-3.6%) meanwhile may continue its recent downward trend, following a SmarTrend announcement it is bearish on the carrier’s stocks. According to SmarTrend, Allegiant Travel is currently below its 50 day moving average of USD40.35 and its 200 day moving average of USD41.17.

GOL (+0.8%) and Fedex (+0.5%) were the only two carriers to end the day up. GOL stocks took their biggest rise in two weeks, on the back of prospects the carrier will benefit from falling oil prices, according to analysts at SLW Corretora de Valores e Cambio Ltda. Auerbach Grayson & Co. added the carrier “is leveraged to consumer demand and it’s a low cost airline that will benefit from growth of the middle class.” 

North & South America selected airlines daily share price movements (% change): 01-Sep-09