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Airline Stock Roundup: GOL Linhas, Copa Holdings' Q4 Earnings; Basic Economy Fares Update & More

Zacks Equity Research

The past week saw Latin American carriers GOL Linhas GOL and Copa Holdings CPA reporting their respective earnings numbers for the fourth quarter of 2016. GOL Linhas reported wider-than-expected loss and lower-than-expected revenues. Copa Holdings, however, topped expectations on both fronts.

On the non-earnings front, American Airlines Group AAL and United Continental Holdings UAL made headlines by virtue of their reduced airfares. The companies, in their bid to combat the threat posed by low-cost carriers like Spirit Airlines SAVE, have started to sell cheaper tickets (Basic Economy Fares).

This apart, the employment data for passenger airlines revealed substantial year-over-year increase in full-time equivalent (FTE) employment in Dec 2016.

Transportation - Airline Industry 5YR % Return

Transportation - Airline Industry 5YR % Return

 (Read the last  Airline Stock Roundup for Feb 15, 2017).

Recap of the Past Week’s Most Important Stories

1. Copa Holdings’ fourth-quarter earnings (on an adjusted basis) of $1.42 per share beat the Zacks Consensus Estimate of $1.35. Earnings were also much above the year-ago figure of 73 cents. Quarterly revenues improved 12.8% on a year-over-year basis to $601 million. Revenues also beat the Zacks Consensus Estimate of $582 million.

The year-over-year increase in the top line was primarily due to a 12.8% improvement in passenger revenues. Unit revenue per available seat mile improved 10.7%, whereas yield per passenger mile inched up 1.3%. Operating cost per available seat mile (CASM) increased 5.3% in the quarter mainly due to higher depreciation expenses.

Passenger traffic (on a consolidated basis) climbed 11.3% and capacity expanded 2% during the quarter. Load factor climbed 680 basis points (bps) to 81.6% as traffic growth outweighed capacity expansion of this Zacks Rank #2 (Buy) carrier. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

2. GOL Linhas’ fourth-quarter loss of 26 cents was wider than the Zacks Consensus Estimate of a loss of 12 cents. However, the loss was much narrower than the year-ago figure of 90 cents. The company expects earnings before interest and taxes (EBIT) margin – a measure of the company's earnings ability – in the band of 6% to 8% for full-year 2017 (Read more: GOL Linhas' Q4 Loss Wider than Expected, Sales Miss).

3 According to data released by the Bureau of Transportation Statistics, there was a 3.7% increase in the number of workers employed by U.S. scheduled passenger airlines in December. This marked the 38th consecutive month of year-over-year increase. According to the update, the most number of FTEs in the month were employed by the American Airlines Group, among the network airlines. Southwest Airlines LUV took the honors in the low-cost carrier category.

4. In a management reshuffle, JetBlue Airways JBLU promoted Steve Priest to the post of executive vice president and chief financial officer with immediate effect. Priest, with his  huge experience, is well suited to oversee multiple functions including treasury, investor relations, corporate tax and audit. Priest, who joined the company in 2015, replaces Jim Leddy (the interim chief financial officer).

5. American Airlines and United Continental have started selling their respective “Basic Economy Fares.” United Continental initially launched its cheapest tickets for travel connecting Minneapolis/St. Paul and any of the carrier’s seven U.S. hubs. American Airlines has started selling Basic Economy tickets for flights, operating from Mar 1, on 10 different routes from its hubs at Dallas, Miami, Philadelphia and Charlotte, North Carolina.

Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months. 

Company

Past Week

Last 6 months

HA

-2.54%

11.6%

UAL

3.63%

60.62%

GOL

21.9%

44%

DAL

2%

39.8%

JBLU

2.2%

25.2%

AAL

-0.62%

30%

SAVE

-4.05%

30%

LUV

3.36%

59.5%

CPA

2.63%

28.1%

ALK

-2.4%

44.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that majority of airline stocks traded in the green last week. As a result, the NYSE ARCA Airline Index climbed to $111.35 in the past week. Over the course of six months, the NYSE ARCA Airline Index gained 26.38%. Shares of United Continental Holdings appreciated the most (60.62%) during the period.

What's Next in the Airline Space?

With the earnings season over, focus will be on usual news updates in the space.

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Southwest Airlines Company (LUV): Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU): Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL): Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA): Free Stock Analysis Report
 
United Continental Holdings, Inc. (UAL): Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
 
American Airlines Group, Inc. (AAL): Free Stock Analysis Report
 
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