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Airline Stock Roundup: CPA's Q2 Loss Led by Coronavirus, Spotlight on GOL, AZUL

Maharathi Basu

In the past week, Copa Holdings CPA reported a loss in second-quarter 2020 results, keeping the overall bearish sentiment alive. This underperformance was due to weak passenger revenues as a result of sagging air-travel demand, which stemmed from the coronavirus pandemic. Notably, carriers like SkyWest SKYW and Gol Linhas Aereas Inteligentes GOL also disappointed investors when it released second-quarter earnings in the previous week

On the non- earnings front, the likes of Azul AZUL, Gol Linhas and Allegiant Travel Company ALGT posted their respective traffic results for July. Despite the recent slight improvement in demand, passenger revenues are way below the year-ago figures. Consequently, traffic decreased significantly on a year-over-year basis.

Recap of the Past Week’s Most Important Stories

1.    Copa Holdings, currently carrying a Zacks Rank #3 (Hold), incurred a loss (excluding $6.38 from non-recurring items) of $2.7 per share in second-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of $3.38. Meanwhile in the year-ago quarter, the company reported earnings of $1.2 per share.  Quarterly revenues of $14.5 million beat the Zacks Consensus Estimate of $14.4 million. However, the top line plunged 97.7% year over year with passenger revenues tumbling 98.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2.    Due to coronavirus-induced bleak air-travel demand, Gol Linhas’ traffic, measured in revenue passenger kilometers (RPK), slumped 80.2% year over year in July. With travel demand way below year-ago levels, the company reduced capacity significantly. For July, capacity measured in available seat miles contracted 78.5%. With travel demand lagging the year-ago levels, the company reduced capacity significantly. For July, capacity, measured in available seat miles, contracted 78.5%. With traffic declining more than the extent of capacity contraction, load factor (% of seats filled by passengers) fell to 78.1% from 84.7% a year ago. Gol Linhas’ total monthly departures tanked 78%.

3. At Allegiant Travel, July traffic for scheduled service dropped 48.2% on a year-over-year basis. Scheduled capacity fell 9.8% to 1516.8 million in the month. Since the decrease in traffic exceeded capacity reduction, load factor was down 3750 basis points year over year to 50.7%. Moreover, the number of passengers carried by Allegiant declined 48.6% year over year to 894.7 million.

4. With air-travel demand increasing gradually, Azul reported 40.7% growth in consolidated traffic for July on a month-over-month basis, backed by the double-digit rise in domestic traffic. Consolidated capacity jumped 33.3% owing to a 43% domestic expansion from the June reading. Management also stated that it expects to operate 407 peak daily departures in September compared with 303 in August.

5.    The recent uptick in air-travel demand after a dip in July can be gauged from the data provided by the Transportation Security Administration (TSA). The TSA reported that 831,789 passengers passed through the TSA checkpoints on Aug 9, the highest single-day total since Mar 17. to a further $25-billion federal aid for the airline industry, which has been one of the worst-hit corners in the investing space.Another bullish update on airlines over the past week was President Donald Trump’s support  to the proposal of a further $25-billion federal aid for the airline industry, which has been one of the worst-hit corners in the investing space.

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 airline stocks have traded in the green in the past week owing to the moderate recovery in air-travel demand. This upside led the NYSE ARCA Airline Index to gain 10.2% to $58.37. Over the course of the past six months, the NYSE ARCA Airline Index has plunged 48.2%..

What's Next in the Airline Space?

Investors will keenly await the second-quarter 2020 earnings release of Azul on Aug 13.

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Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
 
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
AZUL SA (AZUL) : Free Stock Analysis Report
 
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