Airline stocks gain as daily travelers top 3 million, exceeding 2019 high

By Tomi Kilgore

Elliott sends another letter to Southwest calling for change; another analyst says sell Spirit's stock

The airline sector traded mostly higher Monday, after data showed there were more travelers at the end of the July 4 weekend than on any day last year or in 2019.

Within the sector, Southwest Airlines Co.'s stock (LUV) rose after activist investor Elliott Investment Management L.P. sent another letter calling for change, and Delta Air Lines Inc. shares (DAL) got a nice lift ahead of earnings.

The Transportation Security Administration said 3,013,413 people went through its checkpoints on Sunday to end the July 4 travel weekend.

That was more than last year's high of 2,908,785, and the prepandemic-2019 high of 2,882,915, both seen on the Sundays after Thanksgiving.

The U.S. Global Jets ETF JETS rose 0.3% in midday trading, to bounce off Friday's five-month closing low.

Southwest's stock gained 1.2%. Elliott responded to Southwest's adoption last week of a so-called "poison pill," saying that action only "solidified the case for leadership change."

Read: Southwest Airlines adopts 'poison pill' after Elliott Management discloses 11% stake.

In its letter to management, Elliott also said the feedback it received since sending the first letter to Southwest in June was "overwhelmingly consistent" with its belief that the company's performance has been unacceptable, and that change is needed now.

Southwest shares have shed 27.5% over the past 12 months, while the Jets ETF has declined 11.4%. In comparison, the S&P 500 index SPX has rallied 26.6% over the past year.

Elsewhere, Delta's stock rose 1.6%, to bounce off Friday's three-month closing low.

Delta is set to kick off the air-carrier-earnings season when it reports second-quarter results before the July 11 opening bell. The FactSet consensus for earnings per share is currently $2.37, and has increased steadily from the $2.30 consensus at the end of the first quarter.

"Delta's choice to position itself as a premium airline a decade ago is paying dividends today, allowing for outsized revenue growth from their product segmentation strategy as well as the ability to attract high-value corporate travelers and their loyalty," Melius Research analyst Conor Cunningham wrote in a note to clients.

Delta's stock has slipped 2.1% over the past year, but has outperformed those of the other two rival full-service airlines.

United Airlines Holdings Inc. shares (UAL) slipped 0.1% on Monday but has shed 15.3% over the past 12 months. Meanwhile, American Airlines Group Inc.'s stock (AAL) fell 0.7% toward the lowest close since October 2023 on Monday, having tumbled 40.3% over the past year.

Spirit Airlines Inc.'s stock (SAVE) was little changed from Friday's record-low close after another analyst turned bearish on the low-cost carrier.

Deutsche Bank's Michael Linenberg downgraded Spirit's stock to sell from hold, citing the continued drop in the carrier's earnings outlook. The FactSet consensus calls for a per-share second-quarter loss of $1.16, compared with the end-of-March consensus of a 39-cent loss.

The stock has plummeted 82.2% over the past year, highlighted by a 47.1% plunge on Jan. 16 after regulators blocked JetBlue Airways Corp.'s (JBLU) proposed buyout of Spirit.

JetBlue shares tacked on 0.1% on Monday, but have slid 34.6% the past year.

-Tomi Kilgore

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07-08-24 1205ET

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