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The Zacks Analyst Blog Highlights: Delta Air Lines, United Airlines, Southwest Airlines, JetBlue Airways and American Airlines

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·6 min read
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For Immediate Release

Chicago, IL – March 24, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Delta Air Lines DAL, United Airlines UAL,Southwest Airlines LUV, JetBlue Airways JBLU and American Airlines AAL.

Here are highlights from Monday’s Analyst Blog:

U.S. Airlines Coronavirus Cash Grant: Is Federal Help on the Way?

It is widely known that airline stocks are currently reeling under the adversity of coronavirus outbreak. The dreaded coronavirus disease (COVID-19), which was declared a pandemic by the World Health Organization on Mar 11, claimed numerous lives across the globe apart from infecting scores. Consequently, economic activity took a huge beating with many countries/areas on lockdown by order and people staying indoors.

Even though coronavirus-related fears rattled most sectors, the space housing airline stocks, was severely jolted by the outbreak. Evidently, the Zacks Airline industry has shed 60.9% of value since the start of February compared with the S&P 500 Index’s loss of 28.9%.

Outbreak to Hurt Earnings

Due to the pandemic, a huge number of flights were cancelled by carriers as many people are unwilling to fly in a bid to avoid infection from a fellow passenger.

With passenger traffic dwindling, performance of carriers is likely to take a huge hit at least in the near term. For example, Delta Air Lines expects its second-quarter 2020 (April-June) revenues to be $10 billion less, implying an 80% decline from the year-ago reported figure. United Airlines, which decided to cut 95% of its international schedule for April due to the extremely-low demand scenario, now expects March revenues to be down $1.5 billion, indicating a decrease from the prior-year reported number. This Zacks Rank #3 (Hold) Chicago-based carrier also withdrew its first-quarter 2020 and full-year guidance.

Southwest Airlines also withdrew its 2020 guidance as the company sees a massive coronavirus-induced fall in passenger bookings and a significant rise in close-in trip cancellations for March as well as the second quarter of 2020. In fact, JetBlue Airways’ CEO Robin Hayes warned that "the writing is on the wall" that travel demand will not be restored anytime soon.

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

Airlines Looking for Cash Infusion

With airlines witnessing a sharp drop in passenger revenues due to weak demand, it is natural that carriers’ financial positions are being stressed and are therefore looking to bolster their liquidity. Evidently, to enhance liquidity, Delta entered into a $2.6-billion secured credit facility. Moreover, the company is drawing $3 billion under its existing revolving credit facilities. Furthermore, American Airlines recently secured a $1-billion loan to strengthen its financial standing.

Moreover, to stay afloat in this unprecedented crisis, US airlines sought federal help to the tune of more than $50 billion (through loans, grants and tax relief), per Airlines for America (A4A). The amount required is more than thrice the size of the bailout package post 9/11 terror attacks.

Notably, airlines are looking for assistance worth up to $25 billion via grants for passenger air carriers and $4 billion for cargo carriers to address the existing liquidity crunch. Additionally, a similar amount is being pursued by A4A in the form of unsecured loans/ loan guarantees. Also, a tax relief for the battered airlines is in demand.

Hopes of Cash Grant Appear Bleak

Highlighting the need for financial assistance, CEOs of major U.S. airlines and cargo carriers are of the opinion that "Time is running out" and "draconian measures" such as furloughs may now be necessary.

In return for the above assistance, carriers agreed on certain conditions like a cutback in the pay of executives, promises of not laying off through Aug 31 and forgoing dividend payments and stock repurchases. However, according to four congressional aides and airline officials, airlines may not be successful in their endeavors to secure $29 billion in cash grants.

Whatever be the final outcome, we expect investor focus to remain on this burning issue. To this end, we advise investors to watch this space for further developments on how assistance is finally meted out to cash-strapped airlines and the measures undertaken to meet that crunch.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
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
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