Back to top

Image: Bigstock

Airline Stock Roundup: Virgin America Lags, Copa Holdings Tops Earning; American Airlines, Delta in Focus

Read MoreHide Full Article

The past week saw CA-based low cost carrier Virgin America report lackluster Q2 results with both earnings and revenues lagging expectations. On the other hand, Latin American carrier Copa Holdings (CPA - Free Report) performed impressively in the second quarter, coming up with better-than-expected earnings as well as revenues.

On the non-earnings front, American Airlines Group (AAL - Free Report) stole the limelight by virtue of its improved unit revenue forecast for the third quarter and the tentative pay-related deal pertaining to its ground employees. Other notable highlights in the week included the disruption at Delta Air Lines (DAL - Free Report) due to a power outrage and United Continental Holdings’ (UAL - Free Report) July traffic numbers with load factor (% of seats filled with passengers) improving as capacity expansion was outpaced by traffic growth.

TRANSPORTATION-AIRLINE Industry Price Index

TRANSPORTATION-AIRLINE Industry Price Index

 (Read the last Airline Stock Roundup for Aug 03, 2016).

Recap of the Past Week’s Most Important Stories

1. Virgin America, which is expected to be acquired by Alaska Air Group (ALK - Free Report) by year-end, reported lower-than-expected earnings and revenues in the second quarter of 2016. Earnings declined 36.3% from the year-ago quarter (read more: Virgin America Q2 Earnings & Revenues Miss).

2. Copa Holdings’ second-quarter earnings (on an adjusted basis) of 51 cents per share were well above the Zacks Consensus Estimate of 23 cents. Earnings were however significantly below the year-ago figure of 93 cents. Quarterly revenues declined 8.2% on a year-over-year basis to $494 million. Revenues, however, beat the Zacks Consensus Estimate of $483 million.

The year-over-year decline was primarily due to the 8.6% decline in passenger revenues. Operating revenue per available seat mile declined 7.7% and yield per passenger mile decreased 14%. Average fuel price per gallon declined 21.3% year over year. Passenger traffic (on a consolidated basis) climbed 6.2% and capacity contracted 0.4% during the quarter. Load factor climbed 490 basis points to 78.3% as traffic expanded while capacity contracted.

3. Delta Air Lines had to call off over 400 flights and delay several due to a power outage in Atlanta on Aug 8. The outage affected the computer systems which disrupted the company’s operations worldwide (read more: Delta Air Lines: Power Outage Disrupts Operations).

4. Shares of American Airlines were boosted by the tentative labor deal with the TWU-IAM Association, covering 30,000 of its ground employees. The TWU-IAM Association, formed in 2013, is an alliance between the Transport Workers Union (TWU) and the International Association of Machinists and Aerospace Workers (IAM). The deal, covering 12 organized workers’ groups in maintenance, fleet service and other ground services, increases pay by an average of 22%, according to the union (read more: Here's Why American Airlines Stock is Popping Today).

On a separate note, American Airlines revealed July traffic numbers wherein revenue passenger miles (RPMs: a measure of traffic) declined 0.3% while available seat miles (ASMs: a measure of capacity) climbed 2.3%. Load factor declined 210 basis points to 85.2% as traffic contracted while capacity expanded. American Airlines now expects total revenue per available seat mile (RASM: a measure of unit revenue) decline in the band of 3% to 5% for the third quarter (previous outlook had called for a decline in the range of 3.5% to 5.5%). The carrier still expects third-quarter pretax margin, excluding special items, in the band of 12% to 14%.

5. United Continental maintains its consolidated passenger unit revenue decline projection for the third quarter in the band of 5.5% to 7.5%. Traffic – measured in revenue passenger miles – stood at 20.7 billion in Jul 2016, up 1.2% from a year ago. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) inched up 0.7% to 23.7 billion. Meanwhile, the load factor increased to 87.5% from 87% a year ago.

 Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months. 

Company

Past Week

Last 6 months

HA

-0.13%

30.21%

UAL

7.68%

0.21%

GOL

13.04%

279.96%

DAL

2.34%

-14.14%

JBLU

0.88%

-15.55%

AAL

3.86%

-6.82%

SAVE

2.81%

-5.82%

LUV

2.98%

5.40%

VA

-0.13%

102.06%

ALK

0.55%

-2.77%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that most of the airline stocks traded in the green over the past week leading to the NYSE ARCA Airline index appreciating 4.32% at $87.96. Shares of GOL Linhas gained the most (13.04%).

Over the course of six months, the NYSE ARCA Airline index appreciated 14.91% on the back of huge gains at GOL Linhas and Virgin America.

What's Next in the Airline Space?

We expect more traffic updates in the coming days. On the earnings front, GOL Linhas is slated to reveal its second-quarter results on Aug 15.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Published in