Airline Stock Roundup: DAL's Q3 EPS View Cut, ALGT's Disappointing August Traffic
In the past week, Delta Air Lines DAL increased its projection for third-quarter 2023 fuel price per gallon. Due to high costs, DAL also slashed its earnings per share guidance for the third quarter. With oil price moving north, some other airlines too echoed similar sentiments and increased their respective fuel price per gallon projections for the September quarter. That story was covered in detail in the previous week’s writeup.
Allegiant Travel Company ALGT, while reporting disappointing traffic numbers for August, too lifted its current-year projection for fuel price per gallon. Joby Aviation JOBY also grabbed headlines courtesy of its decision to build a new manufacturing facility in Dayton, OH. Meanwhile, an expansion-related update was available from JetBlue Airways JBLU in the past week.
Recap of the Past Week’s Most Important Stories
1. For third-quarter 2023, Delta now anticipates average fuel cost per gallon in the band of $2.75-$2.90 band (prior view: $2.50-$2.70). Apart from rising fuel expenses, DAL is also burdened with expenses related to non-fuel unit costs. Non-fuel unit cost or cost per available seat mile (CASM: adjusted) for the September quarter is now expected to increase 1-2% (earlier estimate was a 1-3% decline) from third-quarter 2022 actuals. The uptick in non-fuel unit costs is due to higher-than-expected maintenance costs.
Operating margin is expected to be around 13% (prior view: mid-teens). For third-quarter 2023, the carrier continues to expect capacity to increase 16% from third-quarter 2022 actuals.DAL now anticipates third-quarter 2023 adjusted earnings in the range of $1.85-$2.05 per share (prior view: $2.20-$2.50). DAL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
2. Joby Aviation has selected a 140-acre site for building the new air-taxi manufacturing facility. The facility will have a capacity to deliver up to 500 aircraft annually. The exercise can generate about 2,000 jobs. Construction for the new facility is expected to start next year, with completion scheduled for 2025.
The selection of Dayton as the site's location is significant. It is considered the birthplace of aviation since the Wright Brothers, who invented and flew the first powered aircraft, lived and worked in Dayton. Joby intends to invest up to $500 million as it ramps up operations at the site.
3. In the month of August, ALGT’s scheduled traffic (measured in revenue passenger miles) fell 4.9% from the year-ago levels. Capacity (measured in available seat miles) for scheduled service decreased 3.9% from the August 2022 reading. The load factor (percentage of seats filled by passengers) in August 2023 came in at 86%.
Total departures (scheduled services) fell 4.8% in August 2023 from its year-ago levels. However, its average stage length (miles) improved 0.8%. For the total system (including scheduled service and fixed fee contract), Allegiant carried 4.7% less passengers in August 2023 from the year-ago period’s level.
Fuel price per gallon in August is estimated to have been $3.16. For full-year 2023, the estimated average fuel cost per gallon system is $3.17, higher than the prior view of $2.90.
4. JetBlue has started operating daily non-stop flights connecting Boston and Amsterdam. The launch of the new route follows the success of JBLU’s Amsterdam service from New York, which was launched on Aug 29. With international air-travel bouncing back, we believe that the decision to add an additional route to the network is a prudent move by JBLU’s management. Passengers on the Boston-Amsterdam route will enjoy the low-carrier’s award-winning Mint service apart from other facilities. JetBlue’s Airbus A321 Long Range aircraft will operate on the route.
Price Performance
The following table shows the price movement of the major airline players over the past week and during the past six months.
Image Source: Zacks Investment Research
The table above shows that almost all airline stocks traded in the red in the past week. As a result, the NYSE ARCA Airline Index declined 2.9% over the period to $56.5. Over the course of the past six months, the sector tracker increased marginally.
What's Next in the Airline Space?
Stay tuned for the usual news updates in the space
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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
Joby Aviation, Inc. (JOBY) : Free Stock Analysis Report
