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Airline Stock Roundup: DAL & UAL's Earnings Beat, SAVE's Q4 View Bullish & More

Maharathi Basu

In the past week, Delta Air Lines DAL kick started the fourth-quarter 2019 earnings season for the airline stocks. The carrier reported better-than-expected earnings per share and revenues in the final quarter of 2019. Moreover, both earnings and revenues increased year over year. Results were aided by upbeat air-travel demand from holiday travelers.

Like Delta, United Airlines Holdings UAL beat on earnings and revenues in the December-end quarter. Both metrics increased year over year. Moreover, United Airlines’ full-year 2019 earnings per share (on an adjusted basis) came in at $12.05 per share, thereby implying that the Chicago-based carrier achieved its earnings per share target (between $11 and $13) a year ahead of schedule.

On the non-earnings front, Spirit Airlines SAVE was the primary news maker courtesy of its improved fourth-quarter guidance with respect to unit revenues and cost. The projections found great favor with investors as the news propelled the stock to its highest level in almost six months’ time. Southwest Airlines LUV also grabbed headlines by virtue of its decision to extend the grounding period of the Boeing 737 Max jets in the company’s fleet till early June, this year.

(Read the Last Airline Stock Roundup here).

Recap of the Past Week’s Most Important Stories

1. Delta’s fourth-quarter 2019 earnings per share (excluding 1 cent from non-recurring items) of $1.70 per share surpassed the Zacks Consensus Estimate by 30 cents. The bottom line also improved 30.8% on a year-over- year basis, mainly owing to low fuel costs. Delta’s results were also aided by the sale of its stake in GOL Linhas GOL. Operating revenues in the quarter came in at $11,439 million, edging past the Zacks Consensus Estimate. Moreover, the top line increased 6.5% on a year-over-year basis. For the first quarter of 2020, the carrier expects revenues to be up 5-7%. The estimated fuel price, including taxes and refinery impact, is expected in the range of $2-$2.20 per gallon for the current quarter. Pre-tax margin is expected to be flat on a year-over-year basis. The company expects total revenues per available seat miles (TRASM: adjusted) to be either flat or increase up to 2% in the quarter. Non fuel unit cost (CASM -Ex) is estimated to increase in the 2-3% range during this period. (Read more: Delta Air Lines' Q4 Earnings Top Estimates, Rise Y/Y).

2. United Airlines’ fourth-quarter 2019 earnings (excluding 14 cents from non-recurring items) of $2.67 per share surpassed the Zacks Consensus Estimate by 3 cents. In addition, the bottom line improved 10.8% year over year, mainly on lower fuel costs. Operating revenues of $10,888 million increased 3.8% year over year. Passenger revenues, accounting for bulk (91.2%) of the top line, rose 3.9% year over year. However, cargo revenues declined 5.4%.

Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) inched up 0.8% year over year to 13.98 cents. Consolidated unit cost or cost per available seat mile (CASM) excluding fuel, third-party business expenses, profit sharing and special charges was up 2.7% year over year. However, total unit costs slipped 1.3% year over year.

For the current quarter, United Airlines anticipates PRASM to either remain flat year over year or increase up to 2%. Average fuel price per gallon is estimated in the range of $2.04-$2.14. Additionally, effective income tax rate is estimated between 22% and 24%. First-quarter adjusted earnings per share are expected between 75 cents and $1.25. The mid-point, $1, of the guided range lies above the Zacks Consensus Estimate of 83 cents.

3. Spirit Airlines stated at an investor update that it now expects fourth-quarter total revenue per available seat mile (TRASM: a key measure of unit revenues) to reflect a decline of 3.6% from fourth-quarter 2018’s reported figure of 9.59 cents. This is an improvement from its outlook issued in October 2019, when the company estimated fourth-quarter 2019 TRASM to drop in the 4.5-6.5% range. Additionally, the new guidance with respect to costs was favorable. The company expects fourth-quarter non-fuel unit costs (on an adjusted basis) to display a 3.3% rise from the fourth-quarter 2018’s reported figure of 5.49 cents. Spirit Airlines had earlier predicted an increase between 3.5% and 4.5% for adjusted non-fuel unit costs. Notably, the company is slated to release detailed fourth-quarter results on Feb 5. (Read more: Spirit Airlines Stock Nears 6-Month High: Here's Why).

4. Southwest Airlines has extended the grounding period of its Boeing 737 MAX jets through Jun 6, 2020, from the previous expectation of Apr 13. Following the extension of the grounding period, Southwest Airlines, which has 34 such jets in its fleet, will remove approximately 330 weekday flights from its peak-day schedule (which exceeds 4,000 flights).

5. In a bid to expand its network, Alaska Airlines intends to operate non-stop flights connecting Seattle and Monterey. Flights on the route are scheduled to be operational from Jun 18. The carrier’s decision to operate on the route is a prudent one as it will be the only non-stop flight connecting the cities. Alaska's sister carrier, Horizon Air, will be responsible for operation of this all-jet service between Seattle and Monterey. An Embraer 175 aircraft will operate on the route.


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

The table above shows that almost all airline stocks traded in the red over the past week, resulting in the NYSE ARCA Airline index's 1.8% decline to $109.38. Over the course of past six months, the NYSE ARCA Airline index has gained 3.5%.

What’s Next in the Airline Space?

Investors will keenly await the fourth-quarter 2019 earnings reports of American Airlines AAL, Southwest Airlines and JetBlue Airways JBLU on Jan 23.

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Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : 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
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
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