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Airline Stock Roundup: SAVE, SKYW Q4 Earnings Top, DAL's January Traffic & More

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Over the last five trading days, the likes of Spirit Airlines SAVE, Allegiant Travel Company ALGT and SkyWest SKYW reported better-than-expected earnings per share and revenues in the fourth quarter of 2017. While, Allegiant and SkyWest’s bottom line expanded year over year, the same declined at Spirit Airlines due to higher costs.

However, revenues increased on a year-over-year basis at all the above-mentioned air carriers. The upside was owing to strong demand for air travel.

On the non-earnings front, January traffic reports from Delta Air Lines DAL and Hawaiian Airlines – a subsidiary of Hawaiian Holdings HA – grabbed headlines. Apart from releasing fourth-quarter results, Spirit Airlines featured in the news owing to the pay-related negotiations with its pilots.  

On the price front, the NYSE ARCA Airline Index declined 3.3% to $114.09 over the past five trading days.

Transportation - Airline Industry 5YR % Return


Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for Jan 31, 2018).

Recap of the Past Week’s Most Important Stories

1. Allegiant ’s fourth-quarter earnings per share (excluding $2.42 from non-recurring items) came in at $2.71, well above the Zacks Consensus Estimate of $1.78. Also, the bottom line expanded 9.3% on a year-over-year basis. Quarterly revenues increased 12.7% year over year to $378.6 million, outpacing the consensus mark of $377.6 million.

The top line was driven primarily by the significant increase (14.2%) in ancillary revenues. (Read more: Allegiant Earnings Surpass Estimates in Q4, Up Y/Y) .

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

2. SkyWest reported impressive numbers for the fourth quarter. This St. George, UT-based company outperformed both in terms of earnings and revenues. The carrier’s earnings (on an adjusted basis) of 81 cents per share were 10 cents above the Zacks Consensus Estimate. Also, the bottom line improved 50% from the year-ago figure, despite high fuel costs. Fuel cost per gallon (average) came in at $2.18 in the reported quarter, up almost 18% on a year-over-year basis.

Quarterly revenues of $797.2 million surpassed the Zacks Consensus Estimate of $770.1 million and also improved on a year-over-year basis. Results were aided by the company’s fleet redeployment exercise. For 2018, the company expects effective tax rate in the range of 24-25% (excluding the impact of discrete items).

3. Spirit Airlines’ fourth-quarter earnings (excluding $2.90 from non-recurring items) came in at 73 cents per share, outpacing the Zacks Consensus Estimate of 71 cents per share. However, quarterly earnings were down 5.2% year over year. Increased labor and fuel costs contributed to the year-over-year decline.

The carrier generated operating revenues of $667 million in the quarter. A 10.4% increase in flight volume contributed to the top line expanding 15.3% on a year-over-year basis.

In the reported quarter, total revenue per available seat mile improved 17.9% year over year. Load factor (% of seats filled by passengers) increased to 81.6% from 81.4% in the year-ago quarter. The upside was owing to traffic growth outpacing capacity expansion (17.6%) in the quarter. On the contrary, total revenue per available seat mile (TRASM: a key measure of unit revenue) declined 1.8% year over year due to the 2.2% reduction in operating yields. Adjusted cost per available seat mile (CASM), excluding special items and fuel, also decreased 4.4%.

Spirit Airlines expects TRASM to decline between 1% and 2.5% for the first quarter of 2018. Adjusted CASM, excluding fuel, is anticipated to decline between 5.5% and 6.5% for the first quarter of 2018.  Fuel cost (economic) is projected to be $2.16 per gallon. Capacity is projected to increase approximately 21.5% in the same time period. The metric is anticipated to expand roughly 23% in 2018. Effective tax rate for the current year is projected at 24%.

Apart from the earnings report, Spirit Airlines has been in the news owing to the pay-related negotiations with its pilots’ union. Recently, the company inked a tentative agreement with the union (Air Line Pilots Association) representing its 1,600 pilots. The agreement will now be put to vote. In the event of the deal getting finalized, costs will increase further at Spirit Airlines, weighing on the bottom line.

4. At Delta, consolidated January traffic — measured in revenue passenger miles (RPMs) — came in at 15.64 billion, flat year over year. Consolidated capacity (or available seat miles/ASMs) inched up 1.8% to 19.62 billion on a year-over-year basis. On the flip side, consolidated load factor fell 150 basis points to 79.7%. This is because capacity expanded while traffic remained flat, leading to vacant seats on planes (Read more: Delta Dips on Disappointing January Traffic Statistics).

5. Hawaiian Airlines posted impressive traffic numbers in January. RPMs came in at 1.37 billion, up 2.6% on a year-over-year basis. Additionally, consolidated capacity inched up 2.3% to 1.63 billion. Load factor increased 20 basis points to 84.1% as traffic growth outpaced capacity expansion in the same month. Hawaiian Airlines transported more than 972 million passengers in the month.

Price Performance

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

The table above shows that all airline stocks traded in the red in the past week leading to the NYSE ARCA Airline Index’s significant decline.

However, over the last six months, the sector tracker has appreciated 1.9% on the back of impressive gains at GOL Linhas GOL.

What's Next in the Airline Space?

Investors will await January traffic reports from the likes of Southwest Airlines LUV in the coming days.

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Southwest Airlines Company (LUV) : Free Stock Analysis Report
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
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