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Airline Stock Roundup: LUV's Improved Q3 Unit Revenue View, ALK & SKYW in Focus

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In the past week, low-cost carrier Southwest Airlines Co. (LUV - Free Report) issued an improved third-quarter unit revenue view, driven by strong demand for air travel. Notably, this Dallas-based company unveiled the new projection while disclosing its August traffic report.

Southwest Airlines apart, the likes of JetBlue Airways Corporation (JBLU - Free Report) , Alaska Air Group, Inc. (ALK - Free Report) , SkyWest, Inc. (SKYW - Free Report) and Copa Holdings, S.A. (CPA - Free Report) unveiled their respective traffic reports for August. Capacity expansion outweighed traffic growth at all the above-mentioned companies barring JetBlue and SkyWest, leading to a fall in load factor (% of seats filled with passengers). Spirit Airlines, Inc. (SAVE - Free Report) also grabbed headlines by virtue of an expansion-related update.

(Read the last Airline Stock Roundup for Sep 12, 2018)

Recap of the Past Week’s Most Important Stories

1. Southwest Airlines expects passenger revenues to be strong backed by impressive bookings and close-in yield trends. The carrier anticipates third-quarter unit revenues (RASM) to be aided between 0.5 to 1 point year over year due to the flight cancellations in July and August, following weather-related disruptions. Combing all these factors, the company now envisions RASM to increase 1-1.5% year over year. Earlier view was a year-over-year change between -1% and 1%. The carrier’s forecast for fuel costs remains unchanged at $2.25 per gallon (read more: Southwest Posts Drop in August Load Factor, Tweaks Q3 View).

Southwest Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. At Copa Holdings, consolidated traffic (measured in revenue passenger miles or RPMs) came in at 1.9 billion, up 2.8% from the year-ago figure. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) rose 4.9% to 2.2 billion. However, consolidated load factor contracted 1.7 percentage points (pp) to 83.4% (read more: Copa Holdings' August Traffic Rises, Load Factor Down).

3. SkyWest reported a 3.9% (6,300) year-over-year decline in block hours (a measure of aircraft utilization) to 155,900 in August. The regional carrier, which remains focused on streamlining its operations, stated that the fall in the metric was in sync with its fleet transition plans.

In August, SkyWest’s dual class aircraft (E175, CRJ 900 and CRJ700) accounted for approximately 54.1% of the carrier’s total block-hour production compared with approximately 53.3% a year ago. Load factor improved 150 basis points to 82.4% in the same month (read more: SkyWest August Block Hours Fall, Load Factor Rises).

4. At Alaska Air Group, load factor decreased 50 basis points to 85.7% as capacity expansion (4.3%) outpaced traffic growth (3.8%). The carrier now expects third-quarter fuel cost per gallon to be $2.32 per gallon, reflecting an increase of 28.9% year over year. The earlier view had anticipated the metric to be $2.30 per gallon (read more: Alaska Air Group's August Load Factor Down, Q3 View Tweaked).

5. In a bid to expand internationally, Spirit Airlines has decided to operate nonstop flights between the Colombian city of Cali and Fort Lauderdale. While flights from Fort Lauderdale to Cali will take to the skies from Dec 20, 2018, the return flight will start operations a day later. In the event of the plan receiving government approval, Cali will be the fifth destination in Colombia to be served by Spirit Airlines. The new route will also offer a gateway to many other destinations, served by the airline in the United States.

6. At JetBlue, traffic and capacity grew 6.7% and 4.8% year over year, respectively. Additionally, the low-cost carrier registered a completion factor (system wide) of 97.4% in August, with 66.7% flights on schedule (read more: JetBlue Posts Solid Traffic on High Travel Demand).

Price Performance

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

 

 

The table above shows that most airline stocks traded in the green over the last week leading to the NYSE ARCA Airline Index increasing 1.7% over the past week. Over the course of six months, the sector tracker gained 1.2%.

What's Next in the Airline Space?

Investors will look forward to further updates on the ongoing labor unrest at European low-cost carrier, Ryanair Holdings plc (RYAAY - Free Report) , in the coming days.

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