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Airline Stock Roundup: ALGT's Traffic Hit by Coronavirus Woes, UAL's Update & More

Maharathi Basu

In the past week,Allegiant Travel Company ALGT reported a 39.4% decline in its March traffic due to the coronavirus-led low air-travel demand. In fact, because of this reason, many airline players reported double-digit declines in their respective March traffic numbers in the previous week too.

Meanwhile, United Airlines UAL posted bleak preliminary first-quarter 2020 results. This Chicago-based carrier was in news for its deal with Bank of China Aviation. The deal is expected to close later this year.

Also, due to the continuous havoc created by the pandemic, the International Air Transport Association (IATA) widened its 2020 passenger revenue decline projection for the airline industry. With airlines gasping for breath, the Trump administration provided them with some cheerful news following an agreement with the Treasury Department in relation to the $25-billion rescue package.

Highlights of the Past Week’s Top Stories

1.    At Allegiant, March traffic for scheduled service, measured in revenue passenger miles (RPMs), plunged 39.4% on a year-over-year basis to 839.77 million. Scheduled capacity, calculated in available seat miles (ASMs), also declined 12.2% to 1.41 billion in the month. With traffic tumbling more than the contraction in capacity, load factor deteriorated to 59.4%.

2.    With airlines severely affected by the coronavirus pandemic, the respective managerial heads had sought for Federal help to stay afloat. An agreement on the same was reached on Apr 14 under which various airlines are entitled to receive assistance. For instance, JetBlue Airways JBLU stands to gain $935.8 million under the Coronavirus Aid, Relief and Economic Security Act. Of the total stimulus fund, an amount worth$685.1 million will be through grants, which the company does not have to repay. The balance will be earned via low-interest loans. American Airlines AAL will receive $4.1 billion in direct support and $1.7 billion in loan. The package under the CARES Act will take care of sustaining jobs only through Sep 30, 2020.

3.    Due to the rapidly washed-out air-travel demand, management at United Airlines stated that first-quarter 2020 revenues (on a preliminary basis) declined 17% year over year to $8 billion. Pre-tax loss (adjusted) was $1 billion. Moreover, United Airlines, which expects to get approximately $5 billion via the payroll support program under the CARES Act, applied for up to $4.5 billion in government loans.

Also, with the carrier expecting to trim its May capacity by 90% (similar cuts are expected in June), it agreed to sell 22 planes to Bank of China Aviation. The pact covers a fleet of six Boeing 787-9 and 16 Boeing 737-9 MAX planes. However, the planes can be leased back to the carrier under long-term agreements.

4.    With passenger revenues being drained by massively fading air-travel demand as multiple countries are on lockdown and wide-spread travel restrictions are in place, IATA expects the same to shrink by $314 billion in 2020 on a year-over-year basis. Previously, the research firm had predicted an erosion of current-year airline revenues by $252 billion.

5.    In a bid to cater to inflated demand for medical supplies in the United States, Delta Air Lines DAL expanded its cargo-only flights between the United States and Asia. As part of increasing the flight-frequency plan, Delta’s scheduled cargo operation to and from Shanghai with a stop in Incheon will be a daily service following the addition of flights from Los Angeles. Notably, Delta’s Detroit service has been in operation since Mar 30. With passenger revenues declining, other carriers like Southwest Airlines LUV are also focusing on offering cargo-only flights.

Price Performance

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

The table above shows that all stocks barring Copa Holdings CPA traded in the red over the past week inducing the NYSE ARCA Airline Index to lose 8.1% of its value over the past week. Over the course of six months, the sector tracker has plummeted 57.7%.

What's Next in the Airline Space?

Investors will look forward to Delta’s first-quarter 2020 earnings report on Apr 22.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
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