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Airline Stock Roundup: AAL, JBLU's Q4 Unit Revenue Views Bearish, GOL in Focus

Maharathi Basu

In the past week, American Airlines Group AAL and JetBlue Airways Corporation JBLU issued bearish views on unit revenues for fourth-quarter 2019. Both companies are scheduled to release their quarterly results on Jan 23.

However, Latin American carrier — Gol Linhas Aereas Inteligentes GOL — issued an upbeat view on fourth-quarter unit revenues backed by strong demand for air travel. Gol Linhas is scheduled to release its fourth-quarter results on Feb 20. The past week also saw the likes of Hawaiian Airlines, Copa Holdings CPA and Alaska Air Group ALK release their respective traffic numbers for December.

(Read the last Airline Stock Roundup here)

Recap of the Past Week’s Most Important Stories

1. American Airlines stated in an investor update that it now expects fourth-quarter total revenue per available seat mile (TRASM: a key measure of unit revenues) to have been either flat or increased up to 1% from the year-ago figure compared with the earlier guidance of either flat or increase up to 2%. Higher completion factor and lower-than-expected yields during the pre-Thanksgiving period resulted in this bearish outlook of the company. On a more positive note, this Zacks Rank #3 (Hold) Fort Worth, TX-based carrier noted that demand for air travel was strong, leading to a better-than-expected revenue performance in December. The company now estimates fourth-quarter costs per available seat miles (excluding fuel and special items) to have increased in the 1-3% band on a year-over-year basis (earlier outlook: increase in the 2-4% range). (Read more: American Airlines Stock Down on Bearish Q4 TRASM Outlook).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. JetBlue now expects fourth-quarter revenue per available seat mile (RASM; a key measure of unit revenues) to have declined 2.7% year over year (earlier guidance: decline between 1.5% and 3.5%). Moreover, the carrier’s December traffic, measured in revenue passenger miles (RPMs), increased 5.7% year over year to 4.6 billion. Consolidated capacity (measured in available seat miles/ASMs) also expanded 4.4% to 5.58 billion on a year-over-year basis. Moreover, load factor (% of seats filled by passengers) expanded 100 basis points (bps) to 82.4% in the month, as traffic rise outpaced capacity expansion. For full-year 2019, load factor shrunk 80 bps to 84%, as capacity expansion (6.6%) outweighed traffic growth (5.6%) in the year.

3. GOL Linhas expects fourth-quarter earnings per share of 30 cents for the October-December quarter, in line with the Zacks Consensus Estimate. Additionally, EBITDA margin is projected at 37-39% for the period compared with the 16.3% reported in the fourth quarter of 2018. With revenue passenger kilometers (RPK) estimated to be up 6%, on the back of strong demand for Gol Linhas’ services, passenger revenue per available seat kilometers is likely to have climbed approximately 11%, per the company. Additionally, revenue per available seat kilometers is predicted to have ascended 11% year over year in the fourth quarter. (Read more: Gol Linhas' Q4 Unit Revenue & Cost Guidance Upbeat).

4. Alaska Air Group now anticipates fourth-quarter 2019 RASM in the range of 13.36-13.38 cents, representing an approximate 4.1% jump year over year. Previously, RASM was anticipated to climb in the 2-4% band. Additionally, cost per available seat miles, excluding fuel and special items, is projected between 9.01 cents and 9.03 cents, indicating an increase of 0.8% from the prior-year reported number. Previously, the metric was anticipated to inch up 0.2% year over year. The estimate for economic fuel cost per gallon has now been raised to $2.21 from $2.20. The new projection indicates a 6% decline from the year-earlier reported figure. Alaska Air Group is scheduled to release results for fourth-quarter 2019 on Jan 28.

On a separate note, Alaska Air Group’s consolidated load factor for December improved 370 bps to 85.9%, as traffic growth (9.4%) outpaced capacity expansion (4.7%). 

5. Traffic at Hawaiian Airlines, the wholly-owned subsidiary of Hawaiian Holdings HA climbed 7.7% December. Meanwhile, capacity expanded 5.4%. Load factor advanced 190 bps to 85.9% in the month, as traffic growth outpaced capacity expansion. (Read more: Hawaiian Airlines' Traffic & Load Factor Rise in December).

6. At Copa Holdings, RPMs slipped 2.2% to 1.81 billion in December. Also, consolidated ASMs decreased 5.9% year over year to 2.12 billion. Load factor improved 330 bps to 85.4%, as traffic decline was less than the decrease in capacity.

 Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months. 

The table above shows that most airline stocks traded in the green in the past week, resulting in the NYSE ARCA Airline Index gaining 1.3% to $109.31 during the period. Over the past six months, the NYSE ARCA Airline Index has depreciated 1%.

What's Next in the Airline Space?

Investors will keenly await United Airlines’ UAL fourth-quarter 2019 earnings report, scheduled to be released on Jan 21.

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Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
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