Back to top

Image: Bigstock

Airline Stock Roundup: LUV's Bullish February Update, JBLU's Pilots Nullify Deal

Read MoreHide Full Article

In the past week, Southwest Airlines’ (LUV - Free Report) management stated that there was a clear improvement in leisure passenger demand and bookings during February. As a result of this uptick in demand, the carrier anticipates its cash burn to improve in the first quarter of from its initial expectations.

However, the scenario was dull for the Brazilian carrier Gol Linhas (GOL - Free Report) with its sales in January declining 18% from the December levels. This downside was due to dampened travel demand, thanks to the second wave of COVID-19 cases in Brazil apart from the seasonal softness in demand. Notably, Gol Linhas’ January traffic, measured in revenue passenger kilometers, tumbled 37.2% year over year in January as discussed in the previous week’s writeup.

Meanwhile, JetBlue Airways’ (JBLU - Free Report) pilots, represented by the Air Line Pilots Association (ALPA), rejected a tentative deal pertaining to the low-cost carrier’s agreement with American Airlines (AAL - Free Report) . Allegiant Travel Company (ALGT - Free Report) was also in news in the past week by virtue of its disappointing January traffic report.

Looking Back at the Top Stories

1. Southwest Airlines now estimates February operating revenues to fall 65-70% both year over year as well as from the February 2019 level. Previously, the same was projected to decline 65-75%. With the recent improvements in operating revenue trends, the company forecasts average core cash burn to be approximately $15 million per day in the first quarter, better than its previous expectation of around $17 million per day.

2. Gol Linhas’ consolidated gross revenues for January decreased 12% from the December 2020 levels to R$ 810 million. Average load factor (percentage of seats filled by passengers) increased 2.2 percentage points to 83.2% last month from the December reading. Passenger revenue per available seat kilometers (PRASK) inched up 2.4% in January from the December levels but declined 12.5% year over year. Meanwhile, Gol Linhas received the delivery of its first Boeing 737 MAX-8 aircraft in January.

 3. Per the ALPA, 53.7% of more than 92% eligible JetBlue pilots voted against the tentative deal. Notably, the tentative deal was aimed at providing JetBlue a contractual relief for implementing its partnership with American Airlines, which was inked in July 2020. The pilots sought more job security from the company while turning down the provisional deal. Per Captain Chris Kenney, chairman of the JetBlue unit of ALPA, “For any agreement to proceed, JetBlue management must provide acceptable assurances that our jobs are safe and valued for years to come”. He further stated that for the successful implementation of the partnership with American Airlines, JetBlue has to offer meaningful career improvements to its pilots apart from the above assurances of job protection. On a more hopeful note, Kenney said that the staff was, however, “ready to work toward an acceptable resolution of these issues”.

4. At Allegiant, January traffic for scheduled service, measured in revenue passenger miles (RPMs), plunged 47.4% on a year-over-year basis to 507.8 million. Scheduled capacity, calculated in available seat miles (ASMs), also fell 25% year over year in the month. With traffic decline exceeding capacity contraction, load factor was slashed 2440 basis points year over year to 57.4%. The number of departures for scheduled services dropped 27.9%. However, the average stage length (average distance flown per aircraft departure) moved up 2.7% to 907 miles in the same month.

For the total system (including scheduled service and fixed fee contract), the number of departures decreased 28.8% while the average stage length inched up 2.9%. The estimated average fuel cost per gallon (systemwide) in January was $1.66.

5. In a bid to expand its footprint in Latin America, Delta Air Lines (DAL - Free Report) aims to restart flights between John F. Kennedy International Airport in New York and the Guarulhos International Airport in São Paulo on Feb 12, 2021. Flights on this route will operate four times a week using the Boeing 767-400 jet. Resumption of operations on the route will expand opportunities for transporting essential goods and services via Delta Cargo.

Price Performance

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

The table above shows that all airline stocks have traded in the green over the past week leading the NYSE ARCA Airline Index to gain 5.9% to $97.05. Over the course of the past six months, the NYSE ARCA Airline Index has appreciated 75.4%.

What's Next in the Airline Space?

Investors will look forward to the updates on a further federal stimulus for the airlines as part of the proposed $1.9-trillion bill.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>