Airlines Picks Amid Political Instability, Terror


June 5, 2017 11:10 a.m. ET

Imperial Capital

Since we issued our Airline Industry Update on May 17, recent terrorist attacks, as well as political instability and unrest around the world has pushed safety and security to the forefront of business travel concerns, in our view.

While the U.S. Department of Homeland Security (DHS) is not expanding its laptop ban to Europe, it is “still on the table,” according to DHS. The use of technology is a primary factor contributing to business travel, in our view, and potential limits are an added risk for future business travel demand.

We have Outperform ratings on the domestic, leisure carriers:


Hawaiian Holdings



HA 1.5444015444015444%



Hawaiian Holdings Inc.


U.S.: Nasdaq


USD52.6


0.8
1.5444015444015444%



/Date(1496696400316-0500)/


Volume (Delayed 15m)
:
575111



AFTER HOURS



USD52.7425


0.142499999999998
0.2709125475285171%


Volume (Delayed 15m)
:
3591




P/E Ratio
12.318501170960188

Market Cap
2778396612.82577


Dividend Yield
N/A

Rev. per Employee
405683









More quote details and news »


(ticker: HA);


JetBlue Airways



JBLU -0.4814004376367615%



JetBlue Airways Corp.


U.S.: Nasdaq


USD22.74


-0.11
-0.4814004376367615%



/Date(1496696400186-0500)/


Volume (Delayed 15m)
:
2378931



AFTER HOURS



USD22.7809


0.0409000000000006
0.17985927880386984%


Volume (Delayed 15m)
:
477773




P/E Ratio
12.225806451612904

Market Cap
7624451283.90275


Dividend Yield
N/A

Rev. per Employee
359665









More quote details and news »


(JBLU);


Spirit Airlines



SAVE 0.877664338169443%



Spirit Airlines Inc.


U.S.: Nasdaq


USD56.32


0.49
0.877664338169443%



/Date(1496696400300-0500)/


Volume (Delayed 15m)
:
707103



AFTER HOURS



USD56.32



%


Volume (Delayed 15m)
:
167




P/E Ratio
16.761904761904763

Market Cap
3872927380.36194


Dividend Yield
N/A

Rev. per Employee
413716









More quote details and news »


(SAVE); and


Southwest Airlines



LUV 1.2534240889848094%



Southwest Airlines Co.


U.S.: NYSE


USD60.99


0.755
1.2534240889848094%



/Date(1496696432793-0500)/


Volume (Delayed 15m)
:
4833257



AFTER HOURS



USD60.99



%


Volume (Delayed 15m)
:
272424




P/E Ratio
18.425981873111784

Market Cap
36497460552.1625


Dividend Yield
0.8198065256599443%

Rev. per Employee
382841









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(LUV).

In the relative short term, we remain concerned that unit revenue growth is peaking in the second and third quarters, and will decelerate in the fourth quarter and 2018. The key factors are: 1) domestic capacity growth may begin outpacing demand, driven by strategic initiatives by


United Continental Holdings



UAL -0.43886383030598564%



United Continental Holdings Inc.


U.S.: NYSE


USD81.67


-0.36
-0.43886383030598564%



/Date(1496696427045-0500)/


Volume (Delayed 15m)
:
1776308



AFTER HOURS



USD81.7716


0.101600000000005
0.12440308558834333%


Volume (Delayed 15m)
:
50889




P/E Ratio
12.84119496855346

Market Cap
25401081782.6465


Dividend Yield
N/A

Rev. per Employee
417966









More quote details and news »


(UAL) and


Alaska Air Group



ALK -0.011196954428395476%



Alaska Air Group Inc.


U.S.: NYSE


USD89.3


-0.01
-0.011196954428395476%



/Date(1496696520867-0500)/


Volume (Delayed 15m)
:
1253307



AFTER HOURS



USD89.3



%


Volume (Delayed 15m)
:
16093




P/E Ratio
15.17030493502081

Market Cap
11039072605.7184


Dividend Yield
1.343784994400896%

Rev. per Employee
331363









More quote details and news »


(ALK); 2) easy comparisons in the second and third quarters become more challenging starting in the fourth quarter, particularly in Latin America and Domestic with the bump in business travel following the election; and 3) political uncertainty in the U.S. that could result in lower-than-expected business confidence, in our view.

Following discussions with the European Union (EU), the DHS is not expanding its laptop ban to Europe, but it is still under consideration, according to media reports. Currently, the ban on laptops and other large electronic devices in airplane cabins affects flight to the U.S. from 10 airports in the Middle East, North Africa, and Istanbul, and is adversely impacting business travel demand, according to a number of the carriers serving the troubled regions, with Emirates, Turkish Airlines and Etihad, slowing capacity growth somewhat.

From a long-term perspective, a recent report by The World Travel and Tourism Council and Travelport Worldwide Ltd., indicated that while business travel is expected to grow 3.7% per annum for the next 10 years, with Asia-Pacific growth at 6.2%, absolute business travel is expected to flatten compared with leisure travel over this time frame. Advances in automation and robotics, geopolitical volatility, increasing protectionism and localization policies may further impact global trade, which business travel is closely tied too, according to the report.

— Michael Derchin
— Adam Hackel

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