In the past week, the major news in the airline domain was the inking of Alaska Air Group’s ALK deal to buy Hawaiian Airlines for $18 per share in cash. The price represents a massive 270% premium to the closing price of Hawaiian Holdings HA — Hawaiian Airlines’ parent company — on Dec 1 (the last trading day before the deal was announced). The transaction is valued at $1.9 billion. This includes $900 million of Hawaiian Airlines’ debt.
Ryanair Holdings RYAAY was also in the news, courtesy of its impressive traffic numbers for November, driven by upbeat air travel demand. The antitrust trial, which was debating on JetBlue Airways’ JBLU planned acquisition of Spirit Airlines SAVE, has ended.
Read the last Airline Roundup here.
Recap of the Past Week’s Most Important Stories
1. Alaska Air’s deal to buy HA is expected to be accretive to ALK’s earnings within two years post-closure, with at least $235 million of expected run-rate synergies. In the event of the deal materializing, Alaska Air’s fleet will expand to 365 narrow and wide-body planes. The transaction has gained approval from the boards of both companies. However, the materialization of the buyout is dependent on required regulatory approvals, Hawaiian Holdings shareholders’ approval (expected to be sought in the first quarter of 2024) and other customary closing conditions. After all these steps, the deal is expected to close in 12-18 months. Even after the deal closure, both companies will maintain their respective brands.
In another development, it was announced that ALK will exit the S&P 500 index on Dec 18, 2023. The airline will move down to the S&P SmallCap 600.
2. The number of passengers ferried on Ryanair flights in November was 11.7 million, marking a 4% year-over-year rise in passengers. The load factor (percentage of seats filled by passengers) was high at 92% in November 2023. The reading was similar in the year-ago period. RYAAY operated more than 66,400 flights in November 2023. However, more than 960 flights got canceled due to the Israel/Gaza conflict.
Currently, RYAAY carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. The trial in which the U.S. Department of Justice urged a federal judge to block JetBlue’s intended $3.8-billion acquisition of Spirit Airlines in an effort to preserve competition among the lowest-cost carriers has been wrapped up. The federal judge may allow the merger to proceed if JetBlue divests more assets. Per a Reuters report, U.S. District Judge William Young told a JetBlue lawyer that he expected airline fares to rise if no-frills, ultra-low-cost Spirit no longer was around to "undercut everyone else" and drive down prices. The judge, who will decide the case in the non-jury trial in Boston, told both parties that he was having "trouble" with the Justice Department's request for a permanent injunction blocking a deal in a "dynamic industry facing unique opportunities and challenges in the post-COVID environment."
The following table shows the price movements of the major airline players over the past week and during the past six months.
Image Source: Zacks Investment Research
The table above shows that almost all airline stocks traded in the green over the past week. Consequently, the NYSE ARCA Airline Index improved 12.2% to $62.3 over the past week. Over the course of six months, the sector tracker has decreased 6.1%.
What's Next in the Airline Space?
Stay tuned for the usual news updates in the space.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report