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Airline Stock Roundup: UAL's Bleak Q4 Forecast, JBLU's Expansion Update & More

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Maharathi Basu
·5 min read
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In the past week, United Airlines UAL provided a grim outlook for its December-quarter revenues and the daily cash burn rate. United Airlines is not the only carrier to have provided a bleak fourth-quarter update as air-travel demand slowed down in the wake of the recent surge in coronavirus cases across the United States. Notably, American Airlines AAL too issued a downbeat outlook for the final quarter of 2020 as was reported in the previous week’s write up.

Meanwhile, JetBlue Airways JBLU too grabbed headlines by virtue of its decision to start commercial flights connecting Guyana and New York. Additionally, Alaska Airlines, the wholly-owned subsidiary of Alaska Air Group ALK, announced the launch of a Pre-Clear program for Hawaii-bound travelers. The program allows passengers to avoid long queues and the time-cosnuming screening process at airports on arrival in Hawaii by producing the negative results of a pre-approved COVID-19 test.

Synopsis of the Past Week’s Top Stories

1. In a SEC filing, management at United Airlines stated that it expects total revenues to decline close to 70% year over year in the fourth quarter from its previous estimate of a decrease of approximately 67%. Additionally, United Airlines predicts average daily cash burn to be approximately $24-$26 million in the fourth quarter compared with $15-$20 million anticipated previously. Moreover, as a result of deceleration in bookings and change in the working capital, the carrier estimates $10 million of average debt principal payments and severance payments per day in the same period.

2. JetBlue is plying the Airbus A321neo aircraft on the New York-Georgetown route. The aircraft features enhanced cushion comfort, adjustable headrests and the maximum legroom in coach among other amenities. Guyana becomes the fourth country to be served by JetBlue in South America. With this, the airline covers nearly 40 destinations in the Caribbean and Latin America.

3. Alaska Airlines’ pre-clear program is aimed at enhancing customer experience and encouraging travel amid a suppressed demand scenario due to coronavirus. Per the pre-clear program, launched in co-ordination with the State of Hawaii, the carrier will pre-clear guests who fulfill the state's requirements prior to check-in without additional screening at Hawaii’s airports on arrival. Alaska Airlines has pilot tested the Hawaii Pre-Clear program on its flights from the West Coast to Maui, before rolling out the service on all flights to Oahu and Kona, on Dec 14. However, the program will exclude Kauai where Alaska Airlines flights are suspended temporarily.

4. Per a BNN Bloomberg report, Southwest Airlines LUV CEO Garry Kelly expects “really rough months” in early 2021. Apart from softness in air-travel demand, the fact that demand is usually low in January and February actually triggered Kelly’s word of caution. Highlighting this dismal scenario, Kelly said that currently, domestic travel is only at around 33% of the year-ago levels. The situation pertaining to international travel is even worse, trending at around 15% of the 2019 levels due to various restrictions. On a brighter note, Kelly expects this Dallas-based carrier, currently carrying a Zacks Rank #3 (Hold), to witness an improved loss in the final quarter of 2020 from the third-quarter net loss of $1,157 million.

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

5. Copa Holdings CPA reported a significant decline in November traffic due to coronavirus-led travel demand woes. Consolidated traffic, measured in revenue passenger miles (RPMs), plunged 74.6% year over year. Amid waning air-travel demand, the airline’s capacity (measured in available seat miles/ASMs) slumped 72.3% in November. Load factor (percentage of seats filled by passengers) slipped 7.3 percentage points to 78.3% as the extent of traffic decline surpasses the contraction in capacity.


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 all airline stocks have traded in the red over the past week, inducing the NYSE ARCA Airline Index dip 2.9% to $85.63. The recent spike in coronavirus cases in the United States and the resultant deceleration in air-travel demand caused the index’s depreciation. Over the course of the past six months, the NYSE ARCA Airline Index has appreciated 57.3%%.

What’s Next in the Airline Space?

Investors will look forward to updates on a second round of federal stimulus.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
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