The Zacks Analyst Blog Highlights: Delta Air Lines, United Continental Holdings, American Airlines Group, JetBlue Airways and Southwest Airlines

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Oct 07, 2014, 09:30 ET

CHICAGO, Oct. 7, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Delta Air Lines, Inc. (NYSE:DAL-Free Report), United Continental Holdings, Inc. (NYSE:UAL-Free Report), American Airlines Group Inc. (Nasdaq:AAL-Free Report), JetBlue Airways Corp. (Nasdaq:JBLU-Free Report) and Southwest Airlines Co. (NYSE:LUV-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Ebola Strikes US: Airline Stocks Dive

The first Ebola case detected in the U.S. has raised fears of an outbreak of the virus. Even though the epidemic remains confined to three African countries, it has dominated domestic headlines. Such concerns are also guiding markets to a significant degree, determining the winners and losers.

First Ebola Case Detected in US

Last Wednesday, shares of prominent airliners declined following reports of the first Ebola case in the U.S. On Tuesday, the Centers for Disease Control (CDC) and Prevention confirmed that a resident of Liberia who had flown to Texas had been detected with the deadly virus.

Several analysts covering airlines as well as medical experts have opined that it is impossible for travelers to contract Ebola while traveling on the same flight with the infected individual. However, a significant number of market watchers believe that the specter of an Ebola outbreak could deter people from travelling by air.

Airline Stocks Slide

The name of the airline on which the infected individual was travelling was not disclosed. As a result, losses were shared by the top companies in the sector. Delta Air Lines, Inc. (NYSE:DAL-Free Report) moved down 4%, while United Continental Holdings, Inc. (NYSE:UAL-Free Report) lost 3.7%. American Airlines Group Inc. (Nasdaq:AAL-Free Report) also declined 3.7%.

What is of particular significance is that United Continental has the highest exposure to Africa because of its Star Alliance. However, its competitors lost equally or even more because of the Ebola factor. In fact, the impact of these concerns was felt throughout the sector. JetBlue Airways Corp. (Nasdaq:JBLU-Free Report) and Southwest Airlines Co. (NYSE:LUV-Free Report) also took losses even though they have minimal presence outside the U.S.

Are Concerns Overrated?

Trade group Airlines for America, which represents the largest airline companies in the U.S., issued a statement on Wednesday regarding concerns over Ebola. In the statement, the group said health officials have ascertained that Ebola cannot be transmitted through the air.

Incidentally, the Department of Transportation lets carriers block travelers who have infectious diseases which could spread during the course of a flight. The trade group said members were in "steady contact with government agencies and health officials, and have procedures in place to monitor and quickly respond to potential health concerns."

New Technology Make Airlines Safer

Meanwhile, the CDC said that contrary to popular perception, newer airplanes have cleaner air. This is because nearly half of cabin air undergoes recirculation with air from outside the aircraft.

Moreover, the air also passes through several high-efficiency particulate filters, nearly 30 times in an hour. According to the CDC's website: "As a result, the air cabin environment is not conducive to the spread of most infectious diseases."

Concerns Still Linger

Despite these statements and swift action on the part of healthcare services, concerns regarding Ebola linger. Some analysts are of the view that if more Ebola cases are detected across the U.S., people will reduce the frequency with which they travel.

This would be equally applicable across both the domestic and international domains. The impact of the Ebola factor was also felt by related sectors last Wednesday.

In Conclusion

A rise in economic indicators, increasing fares and consolidation in the sector has led to a good year for the airline industry til now. Most of the larger airline stocks have seen significant appreciation in their prices. For instance, Southwest has gained more than 75% year to date. However, as long as the specter of an Ebola outbreak continues to linger, airlines could continue to experience rough weather.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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