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Airline Stock Roundup: DAL's Q3 Loss, ALK's Bleak Capacity Update & More

Maharathi Basu
·5 min read

In the past week, Delta Air Lines DAL kicked off the third-quarter 2020 earnings season for the airline stocks. The carrier incurred a loss as the coronavirus-led weak air-travel demand induced a steep 83% fall in passenger revenues.

Meanwhile, Alaska Air Group ALK, the parent company of Alaska Airlines, announced that it will continue to trim its capacity next year in response to lackluster air- travel demand. The carrier is scheduled to report September-quarter results on Oct 22.

Latin American carrier Gol Linhas GOL was also in news, courtesy of its decision to boost capacity as air-travel demand continues to improve in the region. Allegiant Travel Company ALGT, meanwhile, issued a bullish forecast with respect to cash burn for the final quarter of 2020 as leisure-travel demand continues to improve in the United States.

Synopsis of the Past Week’s Top Stories

1. Delta, currently carrying a Zacks Rank #4 (Sell), incurred a loss (excluding $5.17 from non-recurring items) of $3.30 per share in the third quarter of 2020, wider than the Zacks Consensus Estimate of a loss of $3.14. Passenger revenues continued to be weak in the September quarter with a plunge of 83% year over year to $1,938 million. Cargo revenues declined 25% to $142 million. Revenues from other sources inched up only 2% to $982 million. Consequently, total revenues in the September quarter tanked 76% to $3,062 million, falling short of the Zacks Consensus Estimate of $3,091.3 million. Revenue passenger miles (a measure of air traffic) tumbled 83% to 11,545 million. Passenger revenue per available seat mile too took a 55% dive year over year to merely 6.85 cents.

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

2. Gol Linhas stated that it expanded its capacity to 270 flights a day, on average, during last month, representing a 42% surge from the comparable figure in August. The company saw a 36% improvement in demand during the period from the August reading. The uptick in air-travel demand led the carrier to operate 360 flights daily in September on peak days.The company expects earnings before interest, taxes, depreciation and amortization (EBITDA) margin for the September quarter in the 21-23% band.

3. Southwest Airlines LUV is planning to expand its footprint in Chicago, IL and Houston, TX. To this end, the airline intends to add services from Chicago O'Hare International Airport and George Bush Intercontinental Airport. The new service from George Bush Intercontinental will mark the carrier’s return to the airport. The carrier, which has its existing operation at William P. Hobby Airport in Houston, had also served George Bush airport until 2005. The airline expects to begin operations in both the above-mentioned airports in the first half of 2021.

4. Allegiant Travel Company, which will release third-quarter 2020 results on Oct 28, is being aided by the upside in air-travel demand, particularly on the leisure front. This improvement led to better bookings in September. In fact, Gregory Anderson, executive vice president and chief financial officer at Allegiant presented an upbeat view on the September-quarter bookings. Per Anderson, “Gross bookings for the quarter averaged more than $2.0 million per day, which is better than our previous booking levels of less than $2 million per day”. Despite bookings being far below the year-ago levels, its improving scenario prompted the company to issue an encouraging view for the final quarter’s daily cash burn rate. The company expects the metric to be well below $1 million for the December quarter.

5. Alaska Air Group expects its capacity (measured in available seat miles) to decrease roughly 45% in October on a year-over-year basis. Passenger load factor (% of seats filled by passengers) is anticipated to decline in the 45-50% band. Total revenues for the current month are anticipated to slump roughly 65%. Cash burn, which was $117 million in September, is expected to be $125 million in the current month. Moreover, the carrier expects capacity for the December quarter to plunge approximately 40%. Alaska Air Group also stated that approximately 400 employees (mostly flight attendants) were involuntarily furloughed effective Oct 1, 2020, following the expiry of the payroll support program under the CARES Act on Sep 30. On a brighter note, management stated that most of the involuntarily furloughed employees could be recalled by this year-end.

More updates on airline job cuts in the United States were presented in the previous week’s write-up.

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 most airline stocks have traded in the green over the past week. Consequently, the NYSE ARCA Airline Index has appreciated 2.9% to $58.81. Moreover, during the course of the past six months, the NYSE ARCA Airline Index has rallied 28.3% owing to impressive gains at the likes of Gol Linhas, Delta and JetBlue Airways JBLU.

What’s Next in the Airline Space?

Investors will look forward to the third-quarter 2020 results of United Airlines UAL. Results are scheduled to be released on Oct 14, after market close.

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Click to get this free report 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 Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report United Airlines Holdings Inc (UAL) : Free Stock Analysis Report Allegiant Travel Company (ALGT) : Free Stock Analysis Report Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research