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Airline Stock Roundup: Q1 Guidance of UAL, LUV, JBLU & Rest in Focus

In the past week, key airline players like United Airlines UAL, Southwest Airlines LUV, Alaska Air Group ALK, JetBlue Airways JBLU and Spirit Airlines SAVE issued their respective guidance for the first quarter of 2023. The views were revealed at the 2023 JP Morgan Industrials Conference.

High fuel costs are likely to hurt results of these airline companies in first-quarter 2023. Weak demand due to seasonality and reduced capacity may also get reflected in the results.

Read the last Airline Roundup here.

Recap of the Latest Top Stories

1 For the first quarter of 2023, United Airlines now anticipates a loss per share of 60 cents-$1.00 against the prior expected band of earnings per share of 50 cents-$1.00 (provided with the company’s fourth-quarter 2022 results on Jan 17). UAL now anticipates first-quarter 2023 total revenue per available seat mile to increase 22-23% year over year (prior view: up almost 25%). The downbeat view is due to weaker demand growth witnessed in January and February 2023 compared to other months.

UAL, currently carrying a Zacks Rank #2 (Buy), now forecasts first-quarter 2023 average aircraft fuel price per gallon between $3.31 and $3.41 (prior view: $3.19).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

2. Spirit Airlines now expects adjusted operating expenses of $1.45-$1.47 billion for the first quarter of 2023 (earlier view: $1.39-$1.40 billion). The adjusted operating margin is expected between -7 and -9%. Fuel gallons consumed are expected to be 143 million in the first quarter. Fuel price per gallon is anticipated in the $3.45-$3.50 band (earlier view was $3.20). The effective tax rate is still expected to be 24%. Available seat miles are anticipated to increase 12.8% from the first-quarter 2022 actuals, compared with 13.2% expected earlier. Management expects first-quarter 2023 operating revenue per available seat miles to increase in 23.5-24.5% year over year.

3. JetBlue’s management expects first-quarter 2023 capacity to increase in the 8-9% range. CASM, excluding fuel and special items, is predicted to rise 2-4%. Total revenues are now likely to increase in the 32-35% range (previous outlook was in the 28-32% band). Average fuel cost per gallon in the March quarter is now estimated to be between $3.50 and $3.60 (earlier guidance: $3.2-$3.35). CASM, excluding fuel and special items, is now expected to increase in the 1-2% range in the March quarter (earlier view hinted at a 2-4% year-over-year rise).

Management still expects first-quarter 2023 loss in the range of 35-45 cents per share. For full-year 2023, capacity is expected to increase in the band of 5.5-8.5% from the 2022 actuals. CASM, excluding fuel and special items, is predicted to rise 1.5-4.5% from the 2022 actuals. Total revenues for 2023 are still forecast to increase year over year in the high single-digit to low double-digit range. Management still expects 2023 earnings per share to be between 70 cents and $1.00.

4. Due to high fuel costs, Alaska Air’s management trimmed its forecast for first-quarter 2023 adjusted pre-tax margin. The metric is now expected in the -3 to -6% band (earlier range: -1 to -4%). Economic fuel price per gallon for the March quarter is now expected in the $3.35-$3.45 band (earlier forecast: $3.15-$3.35 range). Total revenues are still expected to increase in the 29-32% range year over year. Capacity is still expected to increase in the 11-14% band.

5. Southwest Airlines’ management expects to incur a loss in the first quarter mainly due to high costs. Moreover, LUV continues to expect a negative revenue impact in the $300-$350 million band in first-quarter 2023, primarily limited to January and February, due to operational disruptions in December 2022. For first-quarter 2023, operating revenues are now expected to rise in the 21-23% range as opposed to 20-24% year-over-year growth estimated earlier.

Available seat miles are still estimated to improve 10% from the year-ago reported figure. Economic fuel costs per gallon are now expected in the $3.1-$3.2 range (earlier expectation: $3.25-$3.35). LUV now expects cost per available seat miles, excluding fuel, oil and profit-sharing expenses, and special items, to increase 5.5-6.5% in the first quarter from the comparable period in 2022 (earlier expectation was in the 2-4% range). Approximately 50% of the increase is due to the rise in expenses pertaining to the December 2022 operational disruptions. Interest expenses are still expected to be $65 million in the first quarter.

For 2023, LUV expects available seat miles to improve 15-16% from the 2022 level. Economic fuel costs per gallon are estimated between $2.65 and $2.75 (earlier expectation was in the $2.90-$3 band). Cost per available seat miles, excluding fuel, oil and profit-sharing expenses, and special items, is anticipated to decrease 3.5-5.5% in 2023 from 2022. Interest expenses are expected to be $250 million in 2023. Capital expenditures are anticipated around $4 billion for 2023.


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

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

The table above shows that all airline stocks have traded in the red over the last five trading days. The NYSE ARCA Airline Index has decreased 9.5% to $58.64, mainly due to the unfavorable cost projections for the March quarter. Over the course of the past six months, the NYSE ARCA Airline Index has gained 1%.

What's Next in the Airline Space?

Stay tuned for the usual news updates on the space.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

United Airlines Holdings Inc (UAL) : Free Stock Analysis Report

Southwest Airlines Co. (LUV) : Free Stock Analysis Report

JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report

Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report

Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report

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Zacks Investment Research