Airline Stock Roundup: RYAAY, AZUL Post Q1 Loss, DAL, ALGT in Focus
In the past week, European low-cost carrier Ryanair Holdings RYAAY and Latin American carrier Azul AZUL reported losses in first-quarter 2020 results. With coronavirus continuing to wreak havoc, the carriers have been persistently incurring losses for this earnings season. Notably, the likes of Spirit Airlines SAVE and JetBlue Airways JBLU too suffered losses for the March quarter, which they confirmed while announcing respective first-quarter financial numbers in the previous week.
Delta Air Lines DAL also grabbed headlines in the past week by virtue of its decision to retire its Boeing 777 fleet by the end of this year as it aims to control costs in response to the coronavirus-inflicted extremely bleak demand scenario.
Wrap-Up on the Past Week’s Key Headlines
1. Azul incurred a loss of $1.63 per share on an adjusted basis in the first quarter of 2020, wider than the Zacks Consensus Estimate of a loss of 50 cents. In the year-ago quarter, the company reported adjusted earnings of 49 cents per share. The first-quarter results were affected by the coronavirus-induced drop in demand and depreciation of the Brazilian Real. Fuel cost hedging losses also weighed on the company's performance. Moreover, with capacity expansion outpacing traffic growth, consolidated load factor deteriorated 90 basis points to 81%.
2. Delta, which is currently burning $50 million cash per day, aims to reduce its cash burn rate to zero by 2020-end. The decision to retire its Boeing 777 fleet is a step toward achieving this financial goal.This Zacks Rank #3 (Hold) carrier aims to maintain a trimmed fleet size and network as well as curb itsoverall operations over the next two to three years. In line with this objective, the carrier already accelerated the retirement of its MD-90 aircraft, which is set to be removed in June 2020.
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3. Ryanair incurred a loss of $1.16 per share in the fourth quarter of fiscal 2020 (ended Mar 31, 2020), narrower than the Zacks Consensus Estimate of a loss of $1.29. However, the amount of loss widened year over year. Quarterly revenues of $1,323 million, however, surpassed the Zacks Consensus Estimate of $1,189 million. The top line also declined year over year due to the coronavirus-led drop in air travel demand. Moreover, Ryanair’s profit after tax declined 26.7% year over year in fiscal 2020. The impact of the coronavirus-triggered low demand for air travel was more than €40 million on profits. Fiscal 2020 earnings came in at €0.58 per share, down 24.4% year over year. Ryanair expects to operate less than 1% of its total scheduled flights in the first quarter of fiscal 2021. From July onward, some of the flight services are expected to be resumed.
The carrier expects to incur a loss of more than €200m in the first quarter of fiscal 2021 as a result of the coronavirus-induced decline in traffic and weak pricing. With the company anticipating a rise in demand during the peak summer season, losses are expected to decrease sequentially in the fiscal second quarter. The carrier expects to transport less than 80 million passengers during fiscal 2021. This indicates an approximate 50% slump from its original target of 154 million passengers.
4. At Allegiant Travel Company ALGT, the April traffic for scheduled service, measured in revenue passenger miles (RPMs), plunged 97% on a year-over-year basis. Scheduled capacity, calculated in available seat miles (ASMs), also tumbled 87.2% in the month. With traffic declining more than the contraction in capacity, load factor (or percentage of seats filled by passengers) deteriorated 61.7 percentage points year over year to 19.3%.
5. Per a Reuters report, South-American carrier, LATAM Airlines Group LTM will lay off 1400 employees (3% of its workforce) as it tries to combat the current low-demand scenario due to the pandemic. Notably, LATAM’s Latin American counterparts, namely Gol Linhas GOL and Azul have a sizeable proportion of their employees on unpaid leave.
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 traded in the green over the past week, resulting in the NYSE ARCA Airline Index gaining 2.4% to $44.11. Over the course of six months, the index has depreciated 59.6%.
What’s Next in the Airline Space?
With the first-quarter earnings season almost over, investors will look forward to updates from carriers to combat the coronavirus crisis.
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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
LATAM Airlines Group S.A. (LTM) : Free Stock Analysis Report
AZUL SA (AZUL) : Free Stock Analysis Report
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