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Airline Stock Roundup: Earnings Beat at JBLU, AAL-Qantas Deal & More

Maharathi Basu

In the past week, JetBlue Airways JBLU reported better-than-expected earnings and revenues in the second quarter of 2019. Both the metrics also improved year over year. Results were aided by lower fuel costs and a healthy uptick in passenger revenues that accounted for the bulk of the company’s top line.

On the non-earnings front, American Airlines’ AAL efforts to strengthen its foothold in the Oceania region received a boost when the U.S. Department of Transportation (DOT) finally approved its joint venture with Australia’s leading carrier — Qantas Airways.

Moreover, Alaska Airlines — the wholly owned subsidiary of Alaska Air Group ALK — featured in the headlines when its aircraft technicians ratified the Transition Agreement pertaining to the Virgin America merger. Notably, Alaska Air acquired Virgin America in 2016.

(Read the last Airline Stock Roundup here).

Recap of the Past Week’s Most Important Stories

1. JetBlue’s second-quarter 2019 earnings (excluding 1 cent from non-recurring items) came in at 60 cents per share, which outpaced the Zacks Consensus Estimate by 3 cents. Quarterly earnings also increased 57.9% on a year-over-year basis due to its prudent cost management. Operating revenues totaled $2,105 million, which surpassed the Zacks Consensus Estimate of $2,100.3 million. Moreover, it compared favorably with the year-ago number. Passenger revenues improved 9.3% in the quarter under review. Additionally, this low-cost carrier performed well with respect to revenue per available seat mile (RASM: a key measure of unit revenue) in the reported quarter. (Read more: JetBlue Q2 Earnings & Revenues Top Estimates, Up Y/Y).

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

2. American Airlines’ joint venture with Qantas, which failed to secure DOT’s approval in 2016, finally achieved it this time. The joint venture, which has become effective following the approval, strengthens the carriers’ 30-plus years of partnership by fostering air travel between the United States and Australia as well as New Zealand. Due to the approval, American Airlines will enjoy an expanded codeshare partnership with Qantas and optimized schedules on the trans-Pacific services while reducing the trip time. Notably, fellow-U.S. airline players like Delta Air Lines DAL and United Airlines UAL already have agreements with carriers in the Oceania region. While Delta has a partnership with Virgin Australia, United Airlines has teamed up with Air New Zealand.

3. The integration process in the Alaska Airlines-Virgin America merger received a boost when the Seattle, WA-based carrier’s 900 Airbus and Boeing aircraft technicians ratified a final Transition Agreement. The ratification of the agreement, which includes wage hikes, retirement benefits and other favorable features, combines the Boeing and Airbus technicians into a single group. The technicians are represented by the Aircraft Mechanics Fraternal Association.

4. Azul AZUL stated that credit rating agency Fitch Ratings assigned a credit rating of BB- on a foreign currency scale to the carrier. Moreover, the agency bestowed a national rating of A+ to Brazil’s largest carrier in terms of the number of cities served and flight departures. Additionally, the carrier’s $400 million unsecured notes due 2024 were assigned a BB-rating by Fitch. The outlook is stable. The ratings are reflective of Azul's improved credit risk profile during 2019-2020.

5. Southwest Airlines LUV, which has the largest exposure to Boeing 737 MAX jets among U.S. carriers with 34 such jets in its fleet, announced that it was freezing the hiring of new pilots. This was because of its decision to remove Boeing 737 MAX jets from its schedule until Nov 2. As a result, the carrier will have to cancel approximately 180 flights daily. Some other U.S. carriers like American Airlines and United Airlines too have grounded Boeing 737 MAX jets in their fleets through early November.

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 all airline stocks traded in the green over the past week. Consequently, the NYSE ARCA Airline Index increased 1.2%. Over the course of six months, the NYSE ARCA Airline Index gained 7%.

What's Next in the Airline Space?

Investors will keenly await second-quarter 2019 earnings reports of Southwest Airlines, American Airlines and Alaska Air Group on Jul 25.

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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
AZUL SA (AZUL) : Free Stock Analysis Report
 
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