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Airline Stock Roundup: UAL, HA Q3 Views Bleak, DAL, AZUL & GOL in Focus

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In the past week, United Airlines (UAL - Free Report) trimmed its third-quarter 2020 outlook with respect to capacity and passenger revenues as coronavirus continues to hurt air-travel demand. Due to the same headwind, Hawaiian Holdings (HA - Free Report) , the parent company of Hawaiian Airlines, provided a tepid capacity outlook for the September quarter. Again due to a bleak demand scenario, Delta Air Lines (DAL - Free Report) expects its system capacity for the September quarter to be down approximately 60% year over year.

However, on a cheerful note, Latin American carrier Gol Linhas (GOL - Free Report) announced that it expanded capacity to 190 flights daily, on average, last month owing to the gradual increase in travel demand. Notably, Gol Linhas’ domestic demand for August rose 19.8% from the July reading as mentioned in the previous week’s write-up.

Summary of the Past Week’s Key Headlines

1 United Airlines anticipates capacity to decrease approximately 70% year over year in the third quarter. Previously, the carrier estimated capacity to decline almost 65%. Additionally, passenger revenues are predicted to fall approximately 85% year over year in the current quarter compared with the previous expectation of a plunge of nearly 83%. The company maintains its projection for average daily cash burn at roughly $25 million per day for the third quarter.

2. Hawaiian Holdings, currently carrying a Zacks Rank #4 (Sell), expects third-quarter capacity to slump 87% year over year (earlier outlook provided on Jul 28 projected an 86% deterioration). The guidance cut is due to ramped-down in services pertaining to the carrier’s North America and Neighbor Island networks following fresh restrictions imposed by the government after a spurt in coronavirus cases on the Hawaiian island of O’ahu. However, the company’s cash position as of Aug 31 improved to $997 million from $761 million at the June quarter-end. The company expects third-quarter daily cash burn of $3 million excluding the CARES Act and new financing.

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

3. Gol Linhas witnessed a 20% improvement in demand during August from the July levels. The carrier’s gross sales jumped 27% to R$523 million in August from July. Last month, the company re-opened four bases and increased flights between São Paulo and Rio de Janeiro. Consequently, flight operations augmented 7% in August from July. With this, the carrier’s August capacity was 26% of the year-ago level. After peaking at 260 daily flights in August, Gol Linhas plans to boost capacity to approximately 300 flights per day in September.

4. At Azul (AZUL - Free Report) , August’s consolidated traffic (measured in revenue passenger kilometers) shot up 26.4% on a month-over-month basis. While international traffic declined 4.3%, the metric was up 29.8% on the domestic front. Consolidated capacity (measured in available seat kilometers) jumped 33.3% owing to 36.2% domestic expansion and 6.6% international expansion from the July reading. In August, the carrier flew more than 40% of domestic capacity compared with the level in the same period last year. During the month, Azul noticed an uptick in both booked average fares and revenues.

5. Due to the coronavirus-led fading demand scenario, Delta expects system capacity for the September quarter to be down approximately 60% on a year-over-year basis. Capacity on the international as well as domestic front is anticipated to be down roughly 80% and 50%, respectively, in the same time period. Moreover, coronavirus concerns are affecting the performance of Delta’s SkyMiles loyalty program. Due to weak travel demand, total miles redeemed in the first six months of 2020 shrank 78%. Consequently, loyalty travel award revenues for Delta dwindled 59% in the same time frame.

Management at Delta also announced that the company will not avail of federal loans under the CARES Act. Instead, the carrier has decided to borrow an additional $6.5 billion of debt, backed by its frequent flyer program, SkyMiles

Performance

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

 

The table above shows that airline stocks exhibited a mixed trend with respect to price over the past week leading the NYSE ARCA Airline Index to rise marginally to $63.01. However, during the course of the past six months, the NYSE ARCA Airline Index has appreciated 4.5% owing to impressive gains at the likes of Gol Linhas, Spirit Airlines (SAVE - Free Report) and Alaska Air Group (ALK - Free Report) .

What’s Next in the Airline Space?

Investors will look forward to the updates on a second round of federal financial aid for the airlines.

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