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Airline Stock Roundup: SAVE, JBLU's Bearish Q3 Views, DAL's Traffic Report & More

Maharathi Basu

In the past week, Spirit Airlines SAVE and JetBlue Airways Corporation JBLU trimmed unit revenue projections for third-quarter 2019. Sprit Airlines went a step further and predicted higher non-fuel unit costs for the September quarter mainly due to Hurricane Dorian.

Delta Air Lines DAL also featured in the headlines due to its encouraging traffic report for August, wherein load factor (percentage of seats filled by passengers) improved as traffic growth outpaced capacity expansion.  Additionally, at the Cowen and Company 12th Annual Global Transportation conference, the carrier reiterated its revenue and earnings guidance for the September quarter.

Latin American carriers — GOL Linhas GOL and Azul — also reported an increase in load factor for August as traffic growth outpaced capacity expansion owing to robust demand for air travel. Load factor also increased at Hawaiian Holdings' HA wholly owned subsidiary, Hawaiian Airlines, for the same month.

Meanwhile, United Airlines UAL tweaked its third-quarter projection on passenger unit revenues. The Chicago-based carrier expects sluggish demand in China, including Hong Kong, to hurt third-quarter 2019 revenues. Also, Alaska Air Group ALK revised its guidance for third-quarter unit revenues. The carrier expects revenue per available seat mile (RASM) to improve in the 3-5% range year over year (the earlier guidance had projected an increase in the 2-5% range). Economic fuel cost is now projected to be $2.15 per gallon compared with the earlier projection of $2.21 per gallon.

 (Read the last Airline Stock Roundup here).

Recap of Past Week’s Most Important Stories

1. Spirit Airlines, which cancelled 768 flights due to Hurricane Dorian, now anticipates total revenue per available seat mile (TRASM: a key measure of unit revenues) to decline 2.5-3.5% year over year in the September quarter. The low-cost carrier had previously anticipated TRASM to slide in the 1-2% range. Spirit expects an approximate $25-million revenue impact due to Hurricane Dorian. Adjusted non-fuel unit costs are expected to increase 9-10% year over year in the third quarter, reflecting a 200-basis points increase from the prior estimate. The adversity is due to reduced capacity and higher costs associated with Hurricane Dorian. (Read more: Spirit Affected by Hurricane Dorian Slashes Q3 TRASM View)

Spirit Airlines currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. JetBlue now anticipates RASM to either increase to 2% or remain flat year over year in the September quarter. Previously, the metric was estimated to rise in the 0.5-3.5% range. This bleak third-quarter RASM view can be attributed to 1.25 points negativity from low bookings to Puerto Rico, 0.75 points adversity each from Hurricane Dorian and challenges in Punta Cana, and a 1-point headwind from lower-than-expected demand across its system. (Read more: JetBlue Shares Decline More Than 4% on Q3 RASM View Cut)

3. Backed by strong demand for its services and rising revenues, Delta is hopeful about achieving its third-quarter earnings and revenue targets. For the September quarter, earnings (excluding special items) are anticipated between $2.10 and $2.40 per share Meanwhile, total unit revenues, on an adjusted basis, are estimated to increase 1.5-3.5%. Additionally, the carrier is confident about registering 6-7% top-line growth and a 25% surge in earnings per share in 2019 besides generating solid margins. (Read more: Delta's August Traffic Data Solid on Strong Demand)

4. At GOL Linhas, August’s consolidated traffic, measured in revenue passenger kilometers (RPK), climbed 17.1% to 3.51 billion. International RPK surged 72.5% and domestic RPK grew 11.2% in the same month. On a year-over-year basis, consolidated capacity, measured in available seat kilometers (ASK), increased 9.5% to 4.9 billion primarily on a 53.4% expansion in international capacity. Moreover, the carrier witnessed a 17.6% rise in consolidated passenger count driven by a 57.8% uptick on the international front. (Read more: GOL Linhas' Traffic and Load Factor Increase in August)

5. At Azul, August’s consolidated traffic increased 26.4% year over year owing to 32.3% growth on the domestic front and an 11.2% increase internationally. Meanwhile, consolidated capacity expanded 25.6% mainly due to a 30.1% rise in domestic capacity. Consolidated load factor improved a 0.6 percentage points to 83%. While domestic load factor improved 1.4 percentage points to 82.6%, international load factor contracted 150 percentage points to 84.2%. (Read more: Azul's August Traffic & Load Factor Up on Robust Travel Demand)

6. System-wide traffic at Hawaiian Airlines increased 2.8%, while capacity contracted 1.9%. With traffic increasing and capacity contracting, load factor improved 400 basis points to 88.4%. Moreover, passenger count improved 4% in August to approximately 1.1 million.

During the first eight months of 2019, the carrier registered a 100-basis point improvement in load factor to 86.8% as traffic growth (2.9%) outpaced capacity expansion (1.7%). However, passenger count slipped 1.4% during the same period.

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 most airline stocks traded in the green over the past week, resulting in the NYSE ARCA Airline Index gaining 5.4% to $96.67. Over the course of six months, the same depreciated 1.7% due to double-digit losses at the likes of Spirit Airlines and American Airlines.

What's Next in the Airline Space?

Investors will look forward to August traffic reports from the likes of JetBlue in the coming days.

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Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
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