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What We've Learned From Airline Earnings So Far

- By Jacob Maslow

Airlines are releasing their fourth-quarter 2018 financial results, with Spirit Airlines (SAVE) posting earnings on Tuesday. The low-cost carrier's stock is down over 3% in afternoon trading as forecasts for the industry continue to diminish investor sentiment.


Revenue hit $862.8 million, rising 29.5% from the same period a year ago. Total revenue on a per passenger flight segment basis rose 7.3% to $117.15. Cost performance remains a concern, rising 26.4% year over year with GAAP operating expenses of $726.7 million.

Fuel prices remain a concern for Spirit and other airlines, with fourth-quarter fuel expenses rising 31.1% due to a 14.7% rise in fuel costs per gallon.

Allegiant Travel Co. (ALGT), also known for its low prices, released fourth-quarter earnings this past week. The company, made popular from flight booking reviews and ultra-cheap prices, posted its 64th profitable quarter.

The airline has been in the middle of a changeover to an all Airbus fleet, which put increasing pressure on the airline over the last 24 months. Fuel costs were cited as a major concern for the airline, rising 27% per gallon in 2018. The company's operating margins came in at 15.3%.

Forecasts for the coming year are positive, with higher EBITDA expected. Greater efficiencies and a higher number of seats are expected to boost the airline's revenue.

Allegiant posted earnings per share of $2.56 for 2018, beating most estimates. Passenger revenues helped the company post $412.1 million in revenue, as passenger revenues grew 10.1%.

Better-than-expected earnings were posted for most airlines in the most recent quarter due to a decline in oil prices.

Ryanair Holdings (RYAAY), one of Europe's low-cost carriers, posted lackluster results for its fiscal third-quarter 2019. The company posted a loss of 20 million euros ($22.7 million) due to weaker fares. The earnings release shows a gain of 8% in passengers, rising from 30.4 million to 32.7 million year over year. Revenue rose 9% from 1.41 billion euros to 1.53 billion euros. A net loss of 19.6 million euros was reported, down from a gain of 105.6 million euros a year prior.

Fare cuts led to the airline posting its first loss since 2014.

Excess capacity hurt the company's winter performance, and Chairman David Bonderman plans to leave the company in 2019. Fuel also rose 32% for Ryanair, while total operating costs as a whole rose 20%.

Airline performance in 2019 will be highly impacted by fuel prices as well as demand for higher wages from pilots and crew members.

Disclosure: The author has no stake in the listed equities.

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This article first appeared on GuruFocus.