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Travelers Ebb But China, US Expand Flights: Airlines in Focus
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Per a recent Airlines for America (A4A) study, the number of air travelers being screened by the Transportation Security Administration (TSA) plummeted nationally. On average, there has been a 50% reduction in flight departures with states like New York, Hawaii, Washington DC, Vermont, Massachusetts and New Jersey reporting more than 80% decline in the TSA checkpoint volumes.
Low Traffic
The latest total traveler throughput as of Aug 17 was 773,319. Prior to the ongoing global health crisis, U.S. airlines were transporting a record 2.5 million passengers and 58,000 tons of cargo each day. As travel constraints and stay-at-home orders were implemented, demand for air travel dropped sharply. In short, the estimated COVID-19-triggered loss outbreak is at least more than $98 billion in the first half of 2020.
Majority of the airline stocks have depreciated over the past week, causing the NYSE ARCA Airline Index to decline 5.6% to $55.94, showing that the coronavirus pandemic took a heavy toll on the airline industry.
A4A further noted that the industry has a long road to recovery ahead. Air travel took three years to rebound from the 9/11 terror attacks and more than seven years to see a revival from the Global Financial Crisis of 2008. Market pundits believe that it may take at least two years or longer this time for the aviation industry to bounce back to its pre-COVID levels.
Additionally, the spike in the cases of COVID-19 infection in some European countries will further foil passengers’ travel plans. Earlier during the week, Germany joined the U.K. in imposing a two-week quarantine on flyers returning from Spain.
Revenue declines and losses forced some airliners to suspend their dividend payouts and seek a relief under bankruptcy protection code. Companies like Alaska Air and Ryanair will be trimming respective capacities due to lower forward bookings.
Increase in US-China Flight Frequency
However, the news by The U.S. Transportation Department that U.S. and China agreed to double the number of airline flights between the two countries to eight per week bodes well for the concerned industry. Prior to the COVID-19 outbreak, there were more than 300 flights a week between the two countries. But the flight frequency took a hit as demand for international air travel dried up.
It was announced that United Airlines (UAL) will increase flight services to China to four flights per week from San Francisco to Shanghai beginning Sep 4 while Delta Air Lines (DAL) will expand to four weekly flights. T
he deal marks a further easing of a standoff between the world’s two biggest economies over the pandemic-led travel bans.
Government Aid
Also, another financial stimulus from the Congress augurs well for the airline industry. Possibility of a second airline bailout package strengthened after President Donald Trump backed the proposed extension of the Payroll Support Program under the Cares Act. In fact, a group of 16 Republicans signed a recently, pleading for another financial relief.
Moreover, travel stocks will get a boost as the State Department removed the warning on U.S. citizens against traveling abroad
Airline Stocks in Focus
Though travel will remain under pressure, the surge in flight operations to and from China, government grants and a gradual resurgence in travel demand put the airline industry on investors’ radar to set sights on.
Allegiant Travel Company (ALGT - Free Report) operates low-cost passenger carriers. It focuses on linking leisure travelers in small and medium-sized cities to world-class destinations.
Though Allegiant Travel had an impressive record of dividend payments and share repurchases, it suspended the same following the coronavirus threat. The company’s efforts to modernize its fleet look impressive, which drive its fuel efficiency in the process.
I’s earnings growth rate for the past five-year period is 12%. Its expected earnings growth rate for the next five-year period is 20.9%, higher than the industry average of 10.8%.
Ryanair Holdings (RYAAY - Free Report) is an ultra-low fare carrier, offering scheduled-passenger airline services in Ireland, the UK, Continental Europe, Morocco and Israel. Following months of fleet groundings amid coronavirus concerns, Ryanair resumed operations across 90% of its routes in July. Flying schedules are expected to gradually rise to 60% in August and 70% in September. The company’s cost-cutting measures to combat coronavirus-related adversities are also encouraging.
Its earnings growth rate for the past five-year period is 3%. Its expected earnings growth rate for the next five-year period is 24%, higher than the industry average of 10.8%.
Copa Holdings’ (CPA - Free Report) cost-reduction efforts augur well. The airline anticipates to reduce its monthly cash burn to approximately $66 million in the second half of 2020 from $77 million in the second quarter of 2020.
The company is undergoing a fleet upgrade, which will improve its operating efficiency.
Its expected earnings growth rate for the next five-year period is 13.6%, higher than the industry average of 10.8%.
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Image: Bigstock
Travelers Ebb But China, US Expand Flights: Airlines in Focus
Per a recent Airlines for America (A4A) study, the number of air travelers being screened by the Transportation Security Administration (TSA) plummeted nationally. On average, there has been a 50% reduction in flight departures with states like New York, Hawaii, Washington DC, Vermont, Massachusetts and New Jersey reporting more than 80% decline in the TSA checkpoint volumes.
Low Traffic
The latest total traveler throughput as of Aug 17 was 773,319. Prior to the ongoing global health crisis, U.S. airlines were transporting a record 2.5 million passengers and 58,000 tons of cargo each day. As travel constraints and stay-at-home orders were implemented, demand for air travel dropped sharply. In short, the estimated COVID-19-triggered loss outbreak is at least more than $98 billion in the first half of 2020.
Majority of the airline stocks have depreciated over the past week, causing the NYSE ARCA Airline Index to decline 5.6% to $55.94, showing that the coronavirus pandemic took a heavy toll on the airline industry.
A4A further noted that the industry has a long road to recovery ahead. Air travel took three years to rebound from the 9/11 terror attacks and more than seven years to see a revival from the Global Financial Crisis of 2008. Market pundits believe that it may take at least two years or longer this time for the aviation industry to bounce back to its pre-COVID levels.
Additionally, the spike in the cases of COVID-19 infection in some European countries will further foil passengers’ travel plans. Earlier during the week, Germany joined the U.K. in imposing a two-week quarantine on flyers returning from Spain.
Revenue declines and losses forced some airliners to suspend their dividend payouts and seek a relief under bankruptcy protection code. Companies like Alaska Air and Ryanair will be trimming respective capacities due to lower forward bookings.
Increase in US-China Flight Frequency
However, the news by The U.S. Transportation Department that U.S. and China agreed to double the number of airline flights between the two countries to eight per week bodes well for the concerned industry. Prior to the COVID-19 outbreak, there were more than 300 flights a week between the two countries. But the flight frequency took a hit as demand for international air travel dried up.
It was announced that United Airlines (UAL) will increase flight services to China to four flights per week from San Francisco to Shanghai beginning Sep 4 while Delta Air Lines (DAL) will expand to four weekly flights.
T
he deal marks a further easing of a standoff between the world’s two biggest economies over the pandemic-led travel bans.
Government Aid
Also, another financial stimulus from the Congress augurs well for the airline industry. Possibility of a second airline bailout package strengthened after President Donald Trump backed the proposed extension of the Payroll Support Program under the Cares Act. In fact, a group of 16 Republicans signed a recently, pleading for another financial relief.
Moreover, travel stocks will get a boost as the State Department removed the warning on U.S. citizens against traveling abroad
Airline Stocks in Focus
Though travel will remain under pressure, the surge in flight operations to and from China, government grants and a gradual resurgence in travel demand put the airline industry on investors’ radar to set sights on.
Hence we shortlist a few stocks, each of which currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Allegiant Travel Company (ALGT - Free Report) operates low-cost passenger carriers. It focuses on linking leisure travelers in small and medium-sized cities to world-class destinations.
Though Allegiant Travel had an impressive record of dividend payments and share repurchases, it suspended the same following the coronavirus threat. The company’s efforts to modernize its fleet look impressive, which drive its fuel efficiency in the process.
I’s earnings growth rate for the past five-year period is 12%. Its expected earnings growth rate for the next five-year period is 20.9%, higher than the industry average of 10.8%.
Ryanair Holdings (RYAAY - Free Report) is an ultra-low fare carrier, offering scheduled-passenger airline services in Ireland, the UK, Continental Europe, Morocco and Israel. Following months of fleet groundings amid coronavirus concerns, Ryanair resumed operations across 90% of its routes in July. Flying schedules are expected to gradually rise to 60% in August and 70% in September. The company’s cost-cutting measures to combat coronavirus-related adversities are also encouraging.
Its earnings growth rate for the past five-year period is 3%. Its expected earnings growth rate for the next five-year period is 24%, higher than the industry average of 10.8%.
Copa Holdings’ (CPA - Free Report) cost-reduction efforts augur well. The airline anticipates to reduce its monthly cash burn to approximately $66 million in the second half of 2020 from $77 million in the second quarter of 2020.
The company is undergoing a fleet upgrade, which will improve its operating efficiency.
Its expected earnings growth rate for the next five-year period is 13.6%, higher than the industry average of 10.8%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>