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On Oct 13, Delta Air Lines (DAL - Free Report) kick-started the third-quarter 2022 earnings season in the airline space. This Atlanta-based carrier reported lower-than-expected earnings per share due to high costs and Hurricane Ian–induced disruptions.American Airlines (AAL - Free Report) was also in the news when its management upped the revenue growth forecast for the September quarter owing to strong air-travel demand. An expansion update from United Airlines (UAL - Free Report) was also available in the past week.
However, Latin American carrier Gol Linhas expects to incur a loss in the third quarter due to high fuel costs even though air-travel demand remains strong. Another Latin American carrier Copa Holdings’ (CPA - Free Report) traffic increased in September from the comparable period’s level in 2019 (pre-coronavirus), again reflecting upbeat air-travel demand.
Recap of the Latest Top Stories
1. Delta’s third-quarter 2022 earnings (excluding 42 cents from non-recurring items) of $1.51 per share fell short of the Zacks Consensus Estimate of $1.56. DAL reported earnings of 30 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then. In the third quarter of 2022, total revenues increased more than 52% on a year-over-year basis. The same increased 11% from third-quarter 2019 actuals. The fourth-quarter 2022 adjusted revenue guidance is encouraging and expected to increase in the 5-9% band from the fourth-quarter 2019 actuals, driven by strength in domestic air-travel demand and fast-recovering international travel demand. While air-travel demand is very strong for leisure, business travel is also bouncing back. Operating margin for the fourth quarter is expected in the 9-11% range.
2. American Airlines, currently carrying a Zacks Rank #3 (Hold), expects total revenues for third-quarter 2022 to rise approximately 13% from the third-quarter 2019 actuals (earlier expectation: increase 10-12%). Total revenue per available seat miles (TRASM: a measure of unit revenue) is now anticipated to be 25% higher than the third-quarter 2019 reading (earlier estimate was a 20-24% rise). Driven by upbeat demand, the pre-tax margin, excluding net special items, is anticipated to be 4.5% compared with the 2-4% band expected earlier. The third-quarter operating margin (excluding net special items) is expected to be roughly 7%. The average fuel cost per gallon forecast is maintained in the $3.73-$3.78 range. However, the guidance for fuel gallons consumed is decreased to 1,031 million from 1,040 million.
3. For the third quarter of 2022 (detailed results of which will be out on Oct 27), Gol Linhas anticipates EBITDA margin to be approximately 15% and the EBIT margin to be roughly 5%. GOL estimates an average fuel price per liter to be R$ 6.62. Management anticipates a loss per share of R$1.8, indicating a loss Per American Depositary Shares of 70 cents for the third quarter. Fuel unit costs are anticipated to grow almost 87% from the prior-year actuals, backed by an 89% increase in the average jet fuel price. Passenger unit revenues for the to-be-reported quarter are expected to increase roughly 45% from the year-ago reported figure, driven by upbeat domestic air-travel demand (mainly for leisure) and the gradual recovery in international travel.
Reflecting bullish air-travel demand, GOL’s consolidated traffic in September increased 41.4% from the year-ago level. That story was covered in detail in the previous week’s write-up.
4. In September 2022, Copa Holdings’ traffic, measured in revenue passenger miles (RPMs), increased 3.5% to 1.75 billion from the comparable period’s level in 2019. Increased passenger volume led to this upside. To match upbeat demand, CPA is increasing capacity — measured in available seat miles (ASMs) — which inched up 1.2% from the 2019 level to 2 billion. With traffic growth outpacing capacity expansion, load factor (% of seats filled by passengers) improved 200 basis points (bps) to 86.9% in the last month.
5. United Airlines reportedly decided to add flights to Australian cities with the relaxation of COVID-related travel restrictions and the surge in air-travel demand. UAL plans to fly nonstop from San Francisco International Airport to Brisbane, Melbourne and Sydney; from Los Angeles International Airport to Melbourne and Sydney; and from Houston to Sydney.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
Image Source: Zacks Investment Research
The table above shows that all airline stocks, apart from Gol Linhas, have traded in the green over the five trading days. Gol’s forecast of a third-quarter loss might have induced the southward movement of the stock. The NYSE ARCA Airline Index has inched up 0.4% to $52.88 over the past five trading days. Over the past six months, the NYSE ARCA Airline Index has plummeted 34.3%.
What's Next in the Airline Space?
Investors will keenly await the third-quarter 2022 results of United Airlines and American Airlines, scheduled to be out on Oct 18 and Oct 20, respectively. We expect strong air-travel demand to have aided the top-line performances of both UAL and AAL. However, high fuel costs are likely to have dented their bottom-line performances.
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Airline Stock Roundup: DAL's Q3 Earnings, GOL, AAL's Forecasts & More
On Oct 13, Delta Air Lines (DAL - Free Report) kick-started the third-quarter 2022 earnings season in the airline space. This Atlanta-based carrier reported lower-than-expected earnings per share due to high costs and Hurricane Ian–induced disruptions.American Airlines (AAL - Free Report) was also in the news when its management upped the revenue growth forecast for the September quarter owing to strong air-travel demand. An expansion update from United Airlines (UAL - Free Report) was also available in the past week.
However, Latin American carrier Gol Linhas expects to incur a loss in the third quarter due to high fuel costs even though air-travel demand remains strong. Another Latin American carrier Copa Holdings’ (CPA - Free Report) traffic increased in September from the comparable period’s level in 2019 (pre-coronavirus), again reflecting upbeat air-travel demand.
Recap of the Latest Top Stories
1. Delta’s third-quarter 2022 earnings (excluding 42 cents from non-recurring items) of $1.51 per share fell short of the Zacks Consensus Estimate of $1.56. DAL reported earnings of 30 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then. In the third quarter of 2022, total revenues increased more than 52% on a year-over-year basis. The same increased 11% from third-quarter 2019 actuals. The fourth-quarter 2022 adjusted revenue guidance is encouraging and expected to increase in the 5-9% band from the fourth-quarter 2019 actuals, driven by strength in domestic air-travel demand and fast-recovering international travel demand. While air-travel demand is very strong for leisure, business travel is also bouncing back. Operating margin for the fourth quarter is expected in the 9-11% range.
2. American Airlines, currently carrying a Zacks Rank #3 (Hold), expects total revenues for third-quarter 2022 to rise approximately 13% from the third-quarter 2019 actuals (earlier expectation: increase 10-12%). Total revenue per available seat miles (TRASM: a measure of unit revenue) is now anticipated to be 25% higher than the third-quarter 2019 reading (earlier estimate was a 20-24% rise). Driven by upbeat demand, the pre-tax margin, excluding net special items, is anticipated to be 4.5% compared with the 2-4% band expected earlier. The third-quarter operating margin (excluding net special items) is expected to be roughly 7%. The average fuel cost per gallon forecast is maintained in the $3.73-$3.78 range. However, the guidance for fuel gallons consumed is decreased to 1,031 million from 1,040 million.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. For the third quarter of 2022 (detailed results of which will be out on Oct 27), Gol Linhas anticipates EBITDA margin to be approximately 15% and the EBIT margin to be roughly 5%. GOL estimates an average fuel price per liter to be R$ 6.62. Management anticipates a loss per share of R$1.8, indicating a loss Per American Depositary Shares of 70 cents for the third quarter. Fuel unit costs are anticipated to grow almost 87% from the prior-year actuals, backed by an 89% increase in the average jet fuel price. Passenger unit revenues for the to-be-reported quarter are expected to increase roughly 45% from the year-ago reported figure, driven by upbeat domestic air-travel demand (mainly for leisure) and the gradual recovery in international travel.
Reflecting bullish air-travel demand, GOL’s consolidated traffic in September increased 41.4% from the year-ago level. That story was covered in detail in the previous week’s write-up.
4. In September 2022, Copa Holdings’ traffic, measured in revenue passenger miles (RPMs), increased 3.5% to 1.75 billion from the comparable period’s level in 2019. Increased passenger volume led to this upside. To match upbeat demand, CPA is increasing capacity — measured in available seat miles (ASMs) — which inched up 1.2% from the 2019 level to 2 billion. With traffic growth outpacing capacity expansion, load factor (% of seats filled by passengers) improved 200 basis points (bps) to 86.9% in the last month.
5. United Airlines reportedly decided to add flights to Australian cities with the relaxation of COVID-related travel restrictions and the surge in air-travel demand. UAL plans to fly nonstop from San Francisco International Airport to Brisbane, Melbourne and Sydney; from Los Angeles International Airport to Melbourne and Sydney; and from Houston to Sydney.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
Image Source: Zacks Investment Research
The table above shows that all airline stocks, apart from Gol Linhas, have traded in the green over the five trading days. Gol’s forecast of a third-quarter loss might have induced the southward movement of the stock. The NYSE ARCA Airline Index has inched up 0.4% to $52.88 over the past five trading days. Over the past six months, the NYSE ARCA Airline Index has plummeted 34.3%.
What's Next in the Airline Space?
Investors will keenly await the third-quarter 2022 results of United Airlines and American Airlines, scheduled to be out on Oct 18 and Oct 20, respectively. We expect strong air-travel demand to have aided the top-line performances of both UAL and AAL. However, high fuel costs are likely to have dented their bottom-line performances.