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Airline Stock Roundup: Alaska Air Group Lifts CASM View; GOL Linhas Guides Up
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The past week saw Seattle, WA-based Alaska Air Group (ALK - Free Report) increasing its projections for cost per available seat mile (excluding fuel and other special items) for the current quarter as well as full-year 2017. Higher expenses following the pay-related agreement with the pilots of its subsidiary Horizon Air can be traced back to the increase.
The week also saw GOL Linhas unveiling an improved outlook for 2017 buoyed by its first-quarter performance and impressive traffic reports. Another Latin American carrier Copa Holdings (CPA - Free Report) also featured in the news by virtue of its impressive May traffic report.
On the price front, the NYSE ARCA Airline index declined 1.6% to $114.43 over the past week mainly due to the broader market sell off following the tech slide.
1. Following the ratification of the pay-related deal by the pilots at Horizon Air, Alaska Air Group now expects CASM (excluding fuel and other special items) in the range of 7.95 cents to 8 cents. The projected range in fact reflects an increase from the earlier guidance of 7.88 cents to 7.93 cents. The carrier also raised the second-quarter forecast for fuel costs (economic) per gallon to $1.72 from $1.71 (Read more: Alaska Air Group Lifts CASM View on Deal with Pilots).
2.President Trump announced some changes to the current U.S. policy on Cuba that were put into action by his predecessor Barack Obama. The President’s policy aims to do away with travel directed toward benefiting the military, intelligence or security services of the island nation. Under the new restrictions, travel to Cuba on an individual basis will not be allowed. Even though individual travel has been banned, group travel is allowed.
Airline heavyweights like Delta Air Lines (DAL - Free Report) and American Airlines Group (AAL - Free Report) have reportedly said that while their existing operations to the nation will continue, they would abide by any change that might take place following the announcement of the new policy (Read more: Will New Cuba Travel Policy Hurt U.S. Airlines?).
3. GOL Linhas now expects earnings before interest and taxes (EBIT) margin – a measure of the company's earnings ability – in the band of 7% to 9% (previous view: 6% to 8%). The guidance for EBITDA margin has been raised to the band of 12% to 14% from the earlier projected band of 11% to 13% (Read more: GOL Linhas Unveils Bullish 2017 View on Multiple Tailwinds).
4. Traffic at Copa Holdings, measured in revenue passenger miles, came in at 1.57 billion, up 11.8%. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) increased 6.3% to 1.93 billion. As the increase in traffic outpaced growth in capacity, the load factor (% of seats filled by passengers) climbed 400 basis points (bps) to 81.6% in the month (Read more: Copa Holdings May Traffic Rises 11.8%, Capacity Up).
5. Low cost carrier JetBlue Airways (JBLU - Free Report) received encouraging news when Moody's Investors Service, the rating services arm of Moody's Corp. unveiled its bullish view on the carrier. The firm upgraded the Corporate Family Rating for JetBlue to “Ba1” from “Ba3.” The rating agency also changed the PD Probability of Default Rating to “Ba1” from “Ba3.” The outlook for the rating was stable. The firm is impressed by the carrier’s strong balance sheet and efforts to deepen focus on its popular Mint service among other factors.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
Company
Past Week
Last 6 months
HA
-7.4%
-22.94%
UAL
-1.01%
1.62%
GOL
-4.7%
83.43%
DAL
-1.18%
2.8%
JBLU
-2.5%
1.4%
AAL
-1.93%
-2%
SAVE
-1.8%
-10.5%
LUV
1.9%
19%
CPA
1%
23.6%
ALK
0.08%
-1.7%
The table above shows that most airlines traded in the red last week with shares of Hawaiian Holdings (HA - Free Report) depreciating the most (7.4%).
Over the course of six months, the NYSE ARCA Airline index appreciated marginally mainly due to huge gains at GOL Linhas.
What's Next in the Airline Space?
Apart from the usual news updates, focus will also be on updates from carriers on the new Cuba policy.
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Airline Stock Roundup: Alaska Air Group Lifts CASM View; GOL Linhas Guides Up
The past week saw Seattle, WA-based Alaska Air Group (ALK - Free Report) increasing its projections for cost per available seat mile (excluding fuel and other special items) for the current quarter as well as full-year 2017. Higher expenses following the pay-related agreement with the pilots of its subsidiary Horizon Air can be traced back to the increase.
The week also saw GOL Linhas unveiling an improved outlook for 2017 buoyed by its first-quarter performance and impressive traffic reports. Another Latin American carrier Copa Holdings (CPA - Free Report) also featured in the news by virtue of its impressive May traffic report.
On the price front, the NYSE ARCA Airline index declined 1.6% to $114.43 over the past week mainly due to the broader market sell off following the tech slide.
Transportation - Airline Industry 5YR % Return
Transportation - Airline Industry 5YR % Return
(Read the last Airline Stock Roundup for Jun 14, 2017).
Recap of the Past Week’s Most Important Stories
1. Following the ratification of the pay-related deal by the pilots at Horizon Air, Alaska Air Group now expects CASM (excluding fuel and other special items) in the range of 7.95 cents to 8 cents. The projected range in fact reflects an increase from the earlier guidance of 7.88 cents to 7.93 cents. The carrier also raised the second-quarter forecast for fuel costs (economic) per gallon to $1.72 from $1.71 (Read more: Alaska Air Group Lifts CASM View on Deal with Pilots).
2.President Trump announced some changes to the current U.S. policy on Cuba that were put into action by his predecessor Barack Obama. The President’s policy aims to do away with travel directed toward benefiting the military, intelligence or security services of the island nation. Under the new restrictions, travel to Cuba on an individual basis will not be allowed. Even though individual travel has been banned, group travel is allowed.
Airline heavyweights like Delta Air Lines (DAL - Free Report) and American Airlines Group (AAL - Free Report) have reportedly said that while their existing operations to the nation will continue, they would abide by any change that might take place following the announcement of the new policy (Read more: Will New Cuba Travel Policy Hurt U.S. Airlines?).
3. GOL Linhas now expects earnings before interest and taxes (EBIT) margin – a measure of the company's earnings ability – in the band of 7% to 9% (previous view: 6% to 8%). The guidance for EBITDA margin has been raised to the band of 12% to 14% from the earlier projected band of 11% to 13% (Read more: GOL Linhas Unveils Bullish 2017 View on Multiple Tailwinds).
4. Traffic at Copa Holdings, measured in revenue passenger miles, came in at 1.57 billion, up 11.8%. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) increased 6.3% to 1.93 billion. As the increase in traffic outpaced growth in capacity, the load factor (% of seats filled by passengers) climbed 400 basis points (bps) to 81.6% in the month (Read more: Copa Holdings May Traffic Rises 11.8%, Capacity Up).
Copa Holdings carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5. Low cost carrier JetBlue Airways (JBLU - Free Report) received encouraging news when Moody's Investors Service, the rating services arm of Moody's Corp. unveiled its bullish view on the carrier. The firm upgraded the Corporate Family Rating for JetBlue to “Ba1” from “Ba3.” The rating agency also changed the PD Probability of Default Rating to “Ba1” from “Ba3.” The outlook for the rating was stable. The firm is impressed by the carrier’s strong balance sheet and efforts to deepen focus on its popular Mint service among other factors.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
Company
Past Week
Last 6 months
HA
-7.4%
-22.94%
UAL
-1.01%
1.62%
GOL
-4.7%
83.43%
DAL
-1.18%
2.8%
JBLU
-2.5%
1.4%
AAL
-1.93%
-2%
SAVE
-1.8%
-10.5%
LUV
1.9%
19%
CPA
1%
23.6%
ALK
0.08%
-1.7%
The table above shows that most airlines traded in the red last week with shares of Hawaiian Holdings (HA - Free Report) depreciating the most (7.4%).
Over the course of six months, the NYSE ARCA Airline index appreciated marginally mainly due to huge gains at GOL Linhas.
What's Next in the Airline Space?
Apart from the usual news updates, focus will also be on updates from carriers on the new Cuba policy.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>