Why Is MGIC (MTG) Down 3.1% Since Last Earnings Report?
In the past week, key airline players like SkyWest Inc. SKYW, Allegiant Travel Company ALGT and Ryanair Holdings plc RYAAY unveiled their respective traffic numbers for June. Impressively, all the three reports showed increase in load factor (% of seats filled by passengers) as traffic growth outweighed capacity expansion.
Alaska Air Group, Inc.’s ALK subsidiary, Alaska Airlines, also featured in the headlines by virtue of its expansion-related update. Meanwhile, JetBlue Airways Corporation JBLU took a significant step toward upgrading its fleet and improving the flying experience of its passengers, when it placed an order for 60 Airbus A220-300 planes (previously known as Bombardier CS300). The new, more efficient planes are scheduled to be delivered to JetBlue in the 2020-2025 timeframe. JetBlue has the option of buying 60 more planes from Airbus from 2025 onward.
(Read the last Airline Stock Roundup for Jul 05, 2018)
Recap of the Past Week’s Most Important Stories
1. Ryanair, which is struggling with labor-related issues, reported a 7% increase in traffic for June. Load factor came in at an impressive 96% buoyed by solid demand for air travel. The metric improved from the May 2018 reading of 95% (read more: Ryanair Holdings' June Traffic Rises 7% Amid Labor Unrest).
2. SkyWest reported a 6.2% (9,900) year-over-year decline in block hours (a measure of aircraft utilization) to 149,300 in June 2018. The regional carrier, which remains focused on streamlining its operations, stated that the fall in the metric was in sync with its fleet transition plans. The company intends to reduce the 50-seat jets in its fleet and add new E175 aircraft (read more: SkyWest's June Block Hours Decline, Load Factor Up).
3. At Allegiant, June traffic (for the total system) increased 9.5% and capacity expanded 8.8%. With traffic growth outpacing capacity expansion, load factor inched up 60 basis points year over year to 85.2%. Allegiant’s passenger count rose 11% in the month (read more: Allegiant's Traffic & Load Factor Increase in June).
Allegiant carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
4. At Gol Linhas Aereas Inteligentes S.A., traffic — measured in revenue passenger kilometers (RPK) — increased 4.6% to 2.81 billion. While domestic RPK rose 6.7%, international RPK plunged 16.6%. On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) expanded 4.7% to 3.61 billion. Domestic ASK ascended 5.9%, while international ASK slid 5.8%. The carrier expects operating margin between 1% and 1.5% in the second quarter of 2018, flat year over year. EBITDA margin is estimated to be in the 8-8.5% range. Also, operating cash flow is envisioned in the R$500-550 million band (read more: Gol Linhas Posts a Rise in June Traffic, Guides for Q2).
5. Alaska Airlines has launched a non-stop service between Mineta San Jose International Airport and New York’s John F. Kennedy International Airport (JFK). In fact, the daily roundtrips have been operational since Jul 6. Currently, the carrier is utilizing the A320 aircraft to ply on the routes. With the expanded JFK service, Alaska Airlines now operates 15 flights per day to the airport from six West Coast cities (read more: Alaska Air Unit Begins New York-San Jose Operation).
6. In a bid to modernize its fleet, JetBlue has agreed to buy at least 60 A220-300 jets from Airbus. This multi-billion dollar deal further strengthens the carrier’s association with Airbus. Following the arrival of the new jets, JetBlue plans to do away with its existing fleet of Embraer E-190 planes in the 2020-2025 timeframe. Per the agreement, JetBlue has also agreed to convert its order for 25 A320neos to A321neos, which are comparatively bigger.
7. At United Continental Holdings Inc.’s UAL subsidiary, United Airlines, consolidated traffic for June was 21.74 billion, up 7.2% from the year-ago figure. On a year-over-year basis, consolidated capacity rose 4.2% to 24.66 billion. With traffic growth outpacing capacity expansion, load factor expanded 250 basis points (bps) to 88.2%. The company also posted an on-time performance (mainline) of 63.2% and a completion factor of 99.5% for the month.
The following table shows the price movement of the major airline players over the last week and during the past six months.
The table above shows that all airline stocks traded in the green over the last week leading to a 2.7% increase in the NYSE ARCA Airline Index. Over the course of six months, the sector tracker has decreased 15.9% due to multiple headwinds like rising fuel costs.
What's Next in the Airline Space?
Investors are looking forward to the second-quarter earnings report of Delta Air Lines, Inc. DAL, scheduled to be released on Jul 12. Delta will kick-start the earnings season for airlines.
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Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
SkyWest, Inc. (SKYW) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
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