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Airline Stock Roundup: Q2 Earnings Beat at SKYW & HA, DAL's Traffic Report & More

Maharathi Basu

In the past week, SkyWest SKYW and Hawaiian Airlines’ parent company Hawaiian Holdings HA reported better-than-expected earnings and revenues in the second quarter of 2019. While SkyWest’s quarterly earnings improved year over year driven by its fleet transition efforts, its revenues declined due to the sale of ExpressJet Airlines in January 2019.

Hawaiian Holdings’ top and bottom lines declined year over year. The carrier’s second-quarter performance with respect to operating revenue per available seat mile (RASM: a key measure of unit revenue) was also disappointing. This underperformance can be attributed to increased competition at the company’s primary market, Hawaii, following Southwest Airlines’ LUV entry. What is worse is the below-par RASM view issued by the Honolulu County, HI-based carrier for third-quarter 2019.  

Additionally, European low-cost carrier Ryanair Holdings RYAAY reported lackluster results for the first quarter of fiscal 2020 (ended Jun 30, 2019) due to declining air fares and high costs.

On the non-earnings front, Delta Air Lines’ DAL July traffic report was impressive with the system-wide load factor (% of seats filled by passengers) increasing 140 basis points to 90% as traffic growth outweighed capacity expansion.

 (Read the last Airline Stock Roundup here).

Recap of Past Week’s Most Important Stories

1. SkyWest’s second-quarter 2019 earnings of $1.71 per share surpassed the Zacks Consensus Estimate of $1.60. The bottom line also improved 19.6% on a year-over-year basis. Results benefited from the company’s fleet transition initiatives. Notably, SkyWest has added 25 new E175 aircraft and 11 new CRJ900 aircraft to its fleet since the second quarter of 2018.

Quarterly revenues came in at $744.38 million, exceeding the Zacks Consensus Estimate of $732.97 million. SkyWest’s efforts to modernize its fleet and streamline operations are added positives. The company aims to reduce the 50-seat jets from its fleet and add new E175 aircraft. The carrier reported a 7.7% increase in block hours (a measure of aircraft utilization) during the quarter under review. (Read more: SkyWest Q2 Earnings Beat on Fleet Transition Efforts)

SkyWest carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. Hawaiian Holdings’ second-quarter 2019 earnings (excluding 2 cents from non-recurring items) of $1.23 per share outpaced the Zacks Consensus Estimate of $1.04. However, the bottom line declined 14.6% year over year. Although quarterly revenues of $712.2 million surpassed the Zacks Consensus Estimate of $707.5 million, the metric dipped marginally year over year. RASM decreased 3.1% in the reported quarter.

Airline traffic, measured in revenue passenger miles, inched up 3.6% year over year to 4.49 billion in the quarter under review. Capacity or available seat miles (ASMs) expanded 2.7% to 5.15 billion. Load factor improved 80 basis points to 87.1% in the quarter. (Read more: Hawaiian Holdings Q2 Earnings Beat, Q3 RASM View Dull)

3. Ryanair’s profit after tax in first-quarter fiscal 2020 declined 21% year over year to €243 million. Results were hurt by a 6% decline average fares to €36. Weakness in Germany and the UK contributed to the decline. What's worse, the carrier stated that sluggishness in air fares is likely to persist in the first half of fiscal 2020. Notably, the metric is anticipated to register a decline of 6%. High costs (labor and fuel) too impacted the company’s first-quarter fiscal 2020 results. The top line, however, increased 11% to €2.3 billion on the back of an 11% rise in traffic to 42 million. In the meantime, the load factor was flat at 96%. Ryanair still expects fiscal 2020 profit after tax in the €750-€950 million range, flat year over year.

In another bleak development, the carrier stated that it now expects only 30 Boeing 737 MAX jets to be delivered on time for the summer of fiscal 2020 compared with the previous expectation of 58. As a result of the delay in delivery, Ryanair does not predict any cost savings associated with these jets until fiscal 2021.

Meanwhile, Ryanair’s July traffic report was impressive, with the metric (including 0.6 million from its LaudaMotion unit) increasing 9% year over year to 14.8 million. However, the load factor remained unaltered at 97%.

4. Gol Linhas Aereas InteligentesGOL second-quarter 2019 earnings (excluding 39 cents from non-recurring items) of 11 cents per share matched the Zacks Consensus Estimate. The company incurred a loss in the year-ago period. Results were partly affected by an 8.8% depreciation of the Brazilian real against the US dollar and high fuel costs.

Meanwhile, net revenues came in at $801.1 million (R$3.14 billion), which surpassed the Zacks Consensus Estimate of $702.4 million and increased year over year. The year-over-year top-line improvement can be attributed to solid demand in the Corporate segment and capacity discipline. (Read more: Gol Linhas Q2 Earnings Meet, Revenues Top Estimates)

5. At Delta, consolidated traffic — measured in revenue passenger miles (RPMs) — came in at 23.77 billion, up 5.2% year over year. Consolidated capacity (or available seat miles/ASMs) expanded 3.5% to 26.41 billion on a year-over-year basis. Notably, Delta’s passenger count rose 6.3% to 19.4 million in July. (Read more: Delta's July Traffic Data Strong on Solid Air Travel Demand)

 

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 red over the past week. Consequently, the NYSE ARCA Airline Index decreased 6.8%. Over the course of the last six months, the NYSE ARCA Airline Index gained 0.6%.

What's Next in the Airline Space?

Investors will keenly await second-quarter 2019 earnings reports of Copa Holdings CPA and Azul on Aug 7 and 8, respectively.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
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