Delta and Spirit Add Flights as Airline Investors Dump Shares

NEW YORK ( TheStreet) -- Nothing could save airline shares Tuesday from the perceptions that capacity is growing too fast and major carriers will match fares to compete.

Brent crude oil futures rose 3%, which should have benefited airline shares, even though "West Cost jet fuel spiked in May due to outages at some refiners," according to Cowen & Co. analyst Helane Becker. The S&P 500 fell 1%. Declines at major carriers ranged between a 1.5% decline for Virgin America (VA) shares and a 6% decline for Hawaiian (HA) shares.

Since May 18, airline shares have fallen a cumulative 9%, with American (AAL) down 15%, Southwest  (LUV) down 14% and Delta (DAL) down 11%.

Nevertheless. Delta and Spirit (SAVE), two airlines that are in the middle of Wall Street's increasingly unfavorable view of the industry, both announced capacity increases on Tuesday.

Delta said it will continue to grow at Seattle Tacoma International Airport, where capacity has already grown 13% in the first four months of the year. Delta's Sea-Tac capacity has grown 44% during the period.

Among the big three global carriers, Delta is the only one that has sat in Wall Street's doghouse, primarily because it has been growing in Seattle, as it seeks to build a trans-Pacific hub that would compete with Alaska's (ALK) hub, which is primarily domestic.

Delta said it will add daily service to Bozeman, Mont. in August; thrice-daily service to Pasco, Wash. in November; daily service to Orlando in December; daily service to Boston in April 2016 and thrice-daily service to Victoria, Canada in April 2016.

The Boston and Orlando service will be mainline service aboard Boeing 737-800s and 757-200s, respectively. Delta Connection carrier SkyWest will operate the other flights with CRJ-700 jets.

In a prepared statement, Delta said the Boston service will "provide customers one-stop access through Seattle to the top five destinations in Asia." These are Hong Kong, Shanghai, Seoul, Tokyo Narita and Tokyo Haneda.

By August, the airline will operate 128 flights to 36 destinations from its West Coast hub.

Did the move catch Alaska by surprise? An Alaska spokeswoman declined to comment.

On Tuesday, Alaska shares and Delta shares both declined about 3%.

Spirit's new flights called attention to the other issue that troubles airline analysts -- American's willingness to match fares offered by the ultra-low-cost carriers, of which Spirit is the biggest.

Last week, American CEO Doug Parker rattled investors by saying, in an interview with Bloomberg, that American will "compete aggressively" against discount carriers.

"To the extent capacity comes in and results in lower prices, we'll match those prices because we have to," Parker said. "All we can do is run our own airline and compete against those that chose to grow and we will compete aggressively."

Spirit said Tuesday it will begin twice-daily flights between Los Angeles International Airport and Oakland International Airport starting Nov. 12. With the added flights, Spirit will serve 13 destinations from LAX and five from Oakland.

The new flights will mean 24 flights a day between Oakland and LAX; Southwest and Delta also fly the route.

In addition to the Oakland flights, San Francisco International Airport has an average of 54 flights to LAX. Additionally, SFO has 28 flights a day to four additional Southern California airports.

In reality, the two additional Spirit flights are just a drop in the bucket in one of the best-served U.S. routes. Also, the frequencies are so limited that airlines will not generally feel compelled to match the fares.

But the flights are one more sign that as they take deliveries of new aircraft the ultra-low-fare carriers are going to go nearly everywhere the majors go. For airline investors, that is a scary thought.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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