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Airline Stock Roundup: JBLU Ups Bid for SAVE, RYAAY's Labor Woes & More

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In the latest development pertaining to the takeover of the Miramar, FL-based Spirit Airlines (SAVE - Free Report) , JetBlue Airways (JBLU - Free Report) raised its offer to purchase SAVE. The move, made just ahead of Spirit’s shareholder vote on Jun 30, is aimed at winning this buyout race from rival bidder Frontier Group Holdings (ULCC - Free Report) .

Meanwhile, Ryanair Holdings’ (RYAAY - Free Report) labor problems deepened with its cabin crew planning to go on strike shortly in certain European countries. On the other hand, U.S. based low-cost carrier, Southwest Airlines (LUV - Free Report) raised its view for June quarter’s load factor (% of seats filled by passengers) driven by upbeat air-travel demand. Again, owing to increased passenger traffic, Allegiant Travel’s (ALGT - Free Report) load factor of 86.6% recorded in May was the highest in a month since the onset of the pandemic. Load factor for June is estimated to be roughly 90%

Recap of the Latest Top Stories

1.Per the latest offer, JetBlue is offering $33.50 per share to Spirit Airlines’ shareholders, up from the previous proposal of $31.50. This represents a premium of 68% to Frontier Group Holdings’ proposal to acquire Spirit Airlines. JetBlue’s enhanced proposal continues to offer a reverse break-up fee of $350 million (or $3.20 per Spirit Airlines share) payable to Spirit Airlines in case the deal fails to materialize due to antitrust concerns. The company had initially offered a reverse break-up fee of $200 million. Frontier’s proposal consists of a reverse termination fee of $250 million.

JBLU would prepay $1.50 per share in cash to Spirit Airlines’ shareholders as soon as they vote in favor of the merger deal. With this, SAVE’s shareholders will receive $33.50 per share in cash, consisting of $32 per share in cash at the time of closing of the transaction and the prepayment of $1.50 per share of the reverse break-up fee. Spirit Airlines confirmed the receipt of JetBlue’s updated proposal and said that the board would evaluate it. In February, Frontier first offered to acquire Spirit Airlines in a $2.9-billion deal. Per the terms of the merger agreement, Spirit Airlines’ shareholders will receive $25.83 per share. SAVE will own approximately 48.5% of the combined airline, while the remaining will be owned by ULCC.

2. Per a Reuters report, unions representing Ryanair’s cabin crew are planning to go on strike in Belgium and Portugal from Jun 24 to Jun 26, in their quest for improved pay and working conditions. In France, they plan a strike from Jun 25 to Jun 26 and in Italy on Jun 25. Unions are also planning to go on strike in Spain on Jun 24, Jun 25, Jun 26, Jun 30, and Jul 1-Jul 2. The strikes, on materialization, may act as a spoiler as far as its plans of generating high load factor readings in the summer months are concerned.  That load factor is expected to be high in summer was discussed in the previous week’s write-up.

3. Riding on the healthy booking trend, Southwest Airlines, currently sporting a Zacks Rank #1 (Strong Buy), upped its forecast for second-quarter 2022 load factor. The Dallas-based low-cost carrier now expects load factor in the 85-87% range compared with the earlier estimate of 85%. Capacity forecast is being kept same (down 7% from second-quarter 2019 actuals). That means that the upped load factor forecast implies a higher level of traffic. Even though total operating revenues are likely to improve 12-15% from second-quarter 2019 actuals, the uptick is owing to the improvement in leisure travel. LUV expects second-quarter 2022 managed business revenues to be down in the 20-25% range, compared with second-quarter 2019 levels.

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

4. In May, Allegiant carried 40% more passengers, system-wide, than a year ago. Available seat miles (a measure of capacity) increased 17.1% year over year for the total system as ALGT expands capacity to meet increased demand. In sync with ALGT’s capacity-expansion efforts, capacity for scheduled operations increased 15.5% in May 2022 from the May 2019 actuals (pre-coronavirus era). Due to the increase in oil price, ALGT now expects the average fuel price per gallon for the June quarter to be $4.30 (earlier estimate was $4). Due to increased flight cancellations as a result of labor crunch and a spike in COVID-19 cases, ALGT expects second-quarter 2022 operating revenues to increase roughly 28% from the second-quarter 2019 actuals, which matches the lowest end of the previous estimate of an increase in the 28-32% range.

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 most airline stocks traded in the red over the past week. The NYSE ARCA Airline Index declined 1.7% to $56.26, despite the 6% uptick in SAVE shares following the upgraded takeover offer from JBLU. Over the course of the past six months, the NYSE ARCA Airline Index plummeted 31.9%.

What's Next in the Airline Space?

Air-travel in the United States is being currently hampered due to the labor-crunch induced flight cancellations. With the labor unrest continuing, further updates on the issue are expected in the coming days.