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Airline Stock Roundup: LUV's Bullish Q4 View, Azul's Rosy November Traffic & More

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In the past week, Southwest Airlines (LUV - Free Report) issued a favorable outlook for the fourth quarter of 2021 mainly owing to a busy Thanksgiving holiday travel period and higher fares. Hawaiian Holdings’ (HA - Free Report) revenue outlook for the fourth-quarter was also much brighter owing to strong air-travel demand.JetBlue Airways (JBLU - Free Report) grabbed headlines too by virtue of its decision to expand its codeshare partnership with Irish carrier Aer Lingus.

Furthermore, Azul (AZUL - Free Report) posted upbeat traffic statistics for November as air-travel demand continues to improve in Brazil, courtesy of increased vaccinations.  Driven by this improvement in demand, another Brazilian carrier Gol Linhas expects 2022 revenues to double the current-year levels. Evidently, the uptick in air-travel demand in Brazil drove Gol’s November traffic numbers, as was reported in detail in the previous week’s roundup.

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. 1 Southwest Airlines now expects to be profitable in the fourth quarter. During third-quarter 2021 earnings call in October, LUV’s management had said that it did not expect to reap profits in the fourth quarter due to spike in fuel prices and costs associated with the ramp-up in operations. LUV estimates operating revenues to decline 10-15% in the current quarter from the level achieved in the fourth quarter of 2019. Previously, the same was predicted to decrease 15-25%. Load factor is forecast in the range of 80-85%. Capacity, measured in available seat miles (ASMs), is expected to fall about 8% in the ongoing quarter from the comparable period’s level in 2019. LUV estimates fuel cost per gallon in the band of $2.15-$2.25 (earlier forecast: $2.25-$2.35) in the fourth quarter. Adjusted cost per ASM, excluding fuel, is still expected to increase 8-12% from the fourth-quarter 2019 actuals.

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

2. As part of the expanded codeshare agreement with Aer Lingus, JetBlue is placing its B6 code on flights operated by Aer Lingus between JBLU’s Northeast focus cities and Ireland. These routes connect New York’s John F. Kennedy International Airport and Boston Logan International Airport with Dublin and Shannon. Later, JBLU intends to put its code on certain Aer Lingus routes beyond Ireland. JetBlue and Aer Lingus have been partners since 2008.

3. With continued recovery in air-travel demand in Latin America, Gol Linhas anticipates its 2022 total net revenues to exceed the pre-pandemic (2019) levels. GOL forecast total net revenues to be approximately R$14 billion in 2022 compared with R$13.9 billion in 2019. It expects the same to soar around 100% from the 2021 estimated level. GOL also expects air-travel demand, measured in revenue passenger kilometers, to be approximately 100 billion in 2022 on the domestic front.

4. At Azul, November traffic jumped 44.6% year over year on the domestic front. Capacity, measured in available seat kilometers (ASKs), increased 48.9% from the year-ago level. With capacity expansion outweighing traffic growth, load factor (percentage of seats filled by passengers) deteriorated 2.5 percentage points (p.p) to 81.3% last month. AZUL’s domestic traffic improved not only on a year-over-year basis but also from the pre-pandemic levels.

5. Hawaiian Holdings now expects revenues for fourth-quarter 2021 to be decline approximately between 29% and 32% from fourth-quarter 2019 actuals. The earlier expectation for the metric was an approximate decline in the 32-37% range. Per management, better-than expected demand across its network led to this bullish view. Another favorable aspect of the guidance was that fuel cost per gallon for the final quarter of 2021 is now expected to be $2.30 compared with the earlier projection of $2.41. Adjusted EBITDA is now anticipated between -$65 million and -$25 million (earlier guidance was between -$50 million and -$110 million). HA still expects fourth-quarter 2021 capacity to decline in the 18-21% band from the fourth-quarter 2019 actuals.

Performance

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

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The table above shows that all airline stocks have traded in the red over the past week, causing the NYSE ARCA Airline Index to decrease 5.9% to $79.48. In the past six months, the NYSE ARCA Airline Index has depreciated 24.3%.

What's Next in the Airline Space?

With air-travel demand improving, expansion-related updates from the carriers may be available in the coming days.

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