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Airline Stock Roundup: DAL's Bearish Q4 Unit Revenue View, RYAAY, GOL in Focus

Zacks Equity Research

In the past week, Delta Air Lines DAL trimmed its forecast for fourth-quarter 2018 adjusted total revenue per available seat mile (TRASM: a key measure of unit revenue) due to below-par improvement in close-in yield. This disappointing forecast was unveiled by Delta while releasing its December traffic report.

European low-cost carrier, Ryanair Holdings RYAAY also released its December traffic numbers in the past week. Strong demand for air travel led to improved traffic results. Latin American carrier — Gol Linhas Aereas Inteligentes S.A GOL — too featured in the news by virtue of its fleet modernization efforts.

In another notable development, Qatar Airways bought a 5% stake in China Southern Airlines ZNH. The move is aimed at fortifying Qatar Airways’ foothold in the Chinese market.

On the price front, the NYSE ARCA Airline Index declined 2.7% in the past week, mainly due to Delta’s bearish guidance.

(Read the last Airline Stock Roundup here)

Recap of the Past Week’s Most Important Stories

1. Shares of Delta declined more than 8% on Jan 3, following its bearish fourth-quarter unit revenue view. The company now expects adjusted TRASM to increase approximately 3% on a year-over-year basis. This compares unfavorably to the previous guidance which had called for an approximately 3.5% rise in this key metric.

In fact, this was the second time that Delta had trimmed its fourth-quarter unit revenue forecast in a short span of time. In December, the carrier said that it expects unit revenues to rise 3.5% compared with the 3-5% improvement predicted in October (read more: Delta Stock Plummets on Q4 Unit Revenue View Cut).

Delta carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. At Ryanair, traffic (including 0.3 million from its LaudaMotion unit) rose 12% year over year to 10.3 million. This European low-cost carrier’s passenger growth, excluding traffic from LaudaMotion unit, was only 9% in the month. On the punctuality front, the company scored impressively in December. According to the traffic report, more than 81% of Ryanair’s flights arrived on time (read more: Ryanair Posts Increase in December Traffic, Load Factor Flat).

3. GOL Linhas plans to expedite its fleet renewal process with Castlelake and Apollo Aviation by replacing 13 Boeing 737 Next Generation (NG) aircraft with Boeing 737 MAX-8 aircraft in the next few years. The sale of these 13 737-800 NGs will cut down the Brazilian carrier’s net debt by approximately R$1.1 billion. The revved-up fleet renewal process on account of favorable market conditions will take place during the 2019-2021 period.  (read more: Gol Linhas' Stepped Up Fleet Renewal Plan to Reduce Debt).

4. Southwest Airlines’ LUV co-founder and chairman Emeritus Herbert D. Kelleher expired at the age of 87. Kelleher co-founded the airline in 1967 with Rollin King. He became chairman of the company in 1978 and chief executive in 1981. Kelleher’s contribution toward making Southwest a renowned low-cost carrier in the United States is noteworthy.

Price Performance

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

 

 

The table above shows that majority of airline stocks traded in the red over the past week.

Over the course of six months, the sector tracker declined 13.1% despite impressive gains at the likes of Spirit Airlines

What's Next in the Airline Space?

We expect December traffic reports from the likes of SkyWest SKYW and United Continental Holdings UAL in the coming days.

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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
 
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
 
China Southern Airlines Company Limited (ZNH) : Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
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