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Airline Stock Roundup: AZUL Posts Loss in Q1, CPA, GOL, UAL & LUV in Focus

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In the past week, Latin American carriers Azul (AZUL - Free Report) and Copa Holdings (CPA - Free Report) reported earnings results for first-quarter 2022. That a few Latin carriers were scheduled to report their earnings numbers over the past few trading days, was stated in the previous week’s write-up. Improvement in air-travel demand in the region, courtesy of widespread vaccination, aided results of both the above-mentioned carriers.

On the non-earnings front, another Latin American carrier Gol Linhas (GOL - Free Report) came up with an impressive April traffic report, reflecting the uptick in air-travel demand in Brazil. Moreover, United Airlines (UAL - Free Report) inked a deal with Finnish renewable fuel provider Neste to purchase sustainable aviation fuel (SAF) over the next three years. The move is in line with UAL’s environmentally-friendly agenda. Southwest Airlines (LUV - Free Report) announced plans to make air-travel more comfortable for its passengers.

Recap of the Latest Top Stories

1 Azul incurred a loss (excluding $4.89 from non-recurring items) of $1.14 per share in the first quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of $1.21. The amount of loss narrowed year over year as well. Total revenues of $610.9 million missed the Zacks Consensus Estimate of $638.5 million but increased 82.9% year over year as air-travel demand improved, courtesy of widespread vaccination programs in Brazil. 

Azul, currently carrying a Zacks Rank #4 (Sell), expects its capacity to grow approximately 10% in 2022 from its 2019 reported figure. Revenue per available seat miles is expected to increase by more than 20% in 2022 from its 2019 reported figure. While 2022 EBITDA (excluding non-recurrent items) is expected to be approximately $4 billion, 2023 EBITDA (excluding non-recurrent items) is expected to be $5.5 billion.

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

2. Copa Holdings reported first-quarter 2022 earnings (excluding 23 cents from non-recurring items) of 70 cents per share, which surpassed the Zacks Consensus Estimate of 36 cents.  In the year-ago quarter, CPA had incurred a loss of $2.23 per share. Quarterly revenues of $571.6 million surpassed the Zacks Consensus Estimate of $566.1 million and rose significantly year over year, thanks to an improvement in air-travel demand.

Copa Holdings expects second-quarter 2022 operating margin to be only 3-5%. CPA expects capacity to be 5.9 billion, equivalent to 96% of the second-quarter 2019 level. Load factor (percentage of seats filled by passengers)is estimated to be around 86% in the second quarter. Fuel price is estimated to be $4 per gallon. For the full year, CPA expects capacity to reach approximately 98% of the 2019 level.

3. Per the deal with Neste, UAL can buy up to 52.5 million gallons of SAF for its flights at Amsterdam's Schiphol Airport and potentially at other airports as well. The deal advances UAL’s goal of reducing greenhouse gas emissions by 100% within 2050. In the first year, Neste will provide United Airlines with 2.5 million gallons of SAF in Amsterdam. The supply will ramp up gradually. In the second year, UAL can purchase up to 20 million gallons of SAF, while in the third year, it can take delivery of up to 30 million gallons of SAF.

4. To attract more traffic, Southwest Airlines aims to spend more than $2 billion on improving the flying experience of its passengers. By making this huge investment, LUV intends to introduce bigger overhead bins for luggage, quicker internet onboard and outlets in every single seat, apart from enhancing the cocktail menu. Among other benefits, LUV aims to introduce a fare category called Wanna Get Away Plus, later this month. 

5. In April, Gol Linhas’ consolidated traffic surged 209.5% year over year. To match the increaseddemand situation, GOL is expanding its capacity. In the same month, capacity grew 227.8% year over year. Since traffic growth was less than capacity expansion, load factor declined 4.4 percentage points (p.p) to 78.2% last month.

Upbeat traffic in its domestic markets is leading to the rosy scenario on a consolidated basis. In April, domestic traffic and capacity improved 192.4% and 211.6%, respectively. On the domestic front, 187.9% more passengers boarded GOL’s flights in April 2022 than a year ago.

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 Research
Image Source: Zacks Investment Research

The table above shows that all airline stocks have traded in the red over the past week. The NYSE ARCA Airline Index has declined 13.4%% to $63.67. Over the past six months, the NYSE ARCA Airline Index has declined 30.7%

What's Next in the Airline Space?

With the first-quarter 2022 earnings season almost over for the airlines, stay tuned for the usual news updates in the space.