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Airline Stock Roundup: ALGT's Boing 737MAX Order, GOL's Rosy Traffic Post & More

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In the past week,Allegiant Travel Company (ALGT - Free Report) dominated headlines as it entered into an agreement with The Boeing Company (BA - Free Report) to buy 50 new 737 MAX jets. Latin American carrier Gol Linhas Aereas Inteligentes (GOL - Free Report) also grabbed headlines owing to the 14.7% year-over-year increase in its December traffic as air-travel demand improves in the region.

Despite the omicron variant of COVID-19 ravaging Europe, Ryanair Holdings’ (RYAAY - Free Report) December traffic surged 400% year over year. In the United States, the omicron variant is also creating havoc and ruining holiday travel plans. With crew members being affected in large numbers, airlines are grappling with staffing crisis. To combat the crisis, United Airlines (UAL - Free Report) is reportedly offering triple pay to its pilots who pick up extra trips in January.

Read the last Airline stock Roundup here.

Recap of the Latest Top Stories

1 Omicron-related staffing shortage coupled with bad weather conditions in parts of the United States have caused multiple flight cancellations in the United States since the Christmas Eve. Amid such a bleak scenario, United Airlines reached an agreement with its pilots’ union, the Air Line Pilots Association, offering pilots higher pay to cover open trips. Pilots were offered three-and-a-half times their pay for flying open trips between Dec 30 and Jan 3. Additionally, they are being offered thrice their pay for picking up trips between Jan 4 and Jan 29.

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

2. With air-travel demand improving, courtesy of increased vaccination, December traffic surged at Ryanair to 9.5 million from 1.9 million in December 2020. Load factor (percentage of seats filled with passengers) in December 2021 was 81% compared with 73% in December 2020.

3. At Gol Linhas, December 2021 traffic rose 14.7% year over year. Capacity, measured in available seat kilometers, increased 13.4% year over year to 3.5 billion last month. Since traffic growth was more than capacity expansion, load factor improved 0.9 percentage points (p.p) to 81.9% last month. With steady improvement in travel demand, traffic climbed 10% year over year in 2021. In response to this uptick, Gol Linhas expanded its capacity 7.5% in the year just went by. Load factor ascended 1.9 p.p to 82% in 2021.

4. To modernize and expand its fleet, Allegiant Travel placed an order to Boeing for purchasing 50 new 737 MAX aircraft. Per the deal, Allegiant will buy the 737-7 and 737-8-200 models. The agreement allows ALGT to replace the planes scheduled to retire while expanding the fleet simultaneously as it aims to achieve the projected 10% plus annual growth rate.

Additionally, ALGT has options to purchase 50 additional aircraft. Allegiant intends to take delivery of an initial group of planes in 2023, with the remaining scheduled for 2024 and 2025. The deal with Boeing marks a shift in strategy for ALGT as far as its fleet is concerned. This is because it currently operates an all-airbus fleet.

Performance

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

Zacks Investment ResearchImage Source: Zacks Investment Research

The table above shows that majority of the airline stocks have traded in the green over the past week. However, the gains were muted in nature causing the NYSE ARCA Airline Index to increase marginally to $82.62. Over the past six months, the NYSE ARCA Airline Index has depreciated 15.1%.

What's Next in the Airline Space?

December traffic reports from some carriers are expected in the coming days.