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Airline Stock Roundup: UAL & SAVE Suffer Q2 Loss Under Coronavirus Curse & More

Maharathi Basu

In the past week, both United Airlines UAL and Spirit Airlines SAVE reported losses in respective second-quarter 2020 results. This underperformance was due to a massive drop in passenger revenues as air-travel demand remains suppressed due to the prevalent coronavirus pandemic. Notably, Delta Air Lines DAL also put up a dismal show when it posted second-quarter financial numbers in the previous week.

The partnership between American Airlines AAL and JetBlue Airways JBLU also grabbed headlines. The deal aims to boost connectivity options for travellers in the Northeast through an array of new routes. An expansion update by Alaska Air Group ALK on the past five trading days was also available.

Recap of the Past Week’s Most Important Stories

1.United Airlines, carrying a Zacks Rank #3 (Hold), incurred a loss (excluding $3.52 from non-recurring items) of $9.31 per share for the June quarter, comparing unfavorably with the Zacks Consensus Estimate of a loss of $9.13. Results were hurt by the coronavirus-induced weakness in air-travel demand. Even though operating revenues of $1,475 million slumped 87.1% year over year, the same beat the Zacks Consensus Estimate of $1,217 million. The year-over-year plunge was due to the 93.5% drop in passenger revenues. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2.  Spirit Airlines suffered a loss of $3.59 per share (excluding $1.78 from non-recurring items) for the second quarter, wider than the Zacks Consensus Estimate of a loss of $2.70. However, in the year-ago quarter, the company delivered earnings of $1.69. Meanwhile, operating revenues of $138.5 million surpassed the Zacks Consensus Estimate of $118.5 million. The top line, however, plunged 86.3% year over year due to the coronavirus-led air-travel demand disaster. Passenger revenues, which contributed 94.5% to the top line, plummeted 86.8% year over year. Additionally, revenues from other sources tanked 58.4%.

Adjusted operating expenses increased 8.2% to $829.07 million, mainly on expanded flight volume and higher depreciation and amortization. Average fuel cost per gallon in the reported quarter fell 13.4% year over year to $1.81. Moreover, adjusted cost per available seat miles (CASM) dipped 2.4% in the reported quarter.

However, CASM excluding operating special items and fuel (non-fuel unit costs), escalated more than 100% in the reported quarter due to reduced capacity. Spirit ended the quarter with unrestricted cash, cash equivalents and short-term investments worth $1.2 billion. The carrier estimates average daily cash burn between $3 and $4 million for the September quarter.

3.  The alliance between American Airlines and JetBlue allows both carriers to sell seats on each other's flights and share frequent flyer benefits. The codeshare agreement under this partnership permits JetBlue passengers to access more than 60 routes operated by American Airlines. Similarly, passengers of the latter can fly on more than 130 routes operated by the former. The contract also provides extended and seamless connectivity between flights of the two carriers. Moreover, passengers of both airlines will enjoy benefits like easy ticketing and better baggage check-in facilities.

4.  Per a CNBC report, Delta proposed a 15% cut in pilots’ minimum pays to avoid furloughs for a year. With air-travel demand falling way below the year-ago levels amid coronavirus concerns, the airline is focusing on cost cuts which require rightsizing its network to align with the current bleak demand scenario. To this end, Delta sent potential furlough notices to more than 2,500 pilots.

5.  Alaska Air announced plans of adding a total of 12 destinations in response to the gradual demand recovery despite the continuing COVID-19 uncertainty. The carrier plans to add seven routes from Los Angeles International Airport  to boost connectivity between Southern California and the key markets around the country. Alaska Air aims to fly to 35 non-stop destinations from Los Angeles this winter.

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 almost all airline stocks traded in the red in the past week due to the spike in coronavirus cases the United States, which has stopped the rebound in air-travel demand. The downside caused the NYSE ARCA Airline Index to decline 1.4% to $53.1. Over the course of the past six months, the NYSE ARCA Airline Index has plunged 51.8%.

What's Next in the Airline Space?

Investors will keenly await the second-quarter 2020 earnings releases of JetBlue on Jul 28 and Allegiant Travel Company ALGT on Jul 29.

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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
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