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Airline Stock Roundup: AAL's Bullish Q2 Forecast, ALGT's Labor Deal & More

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In the past week, American Airlines’ (AAL - Free Report) management lifted its earnings per share forecast for second-quarter 2023, driven by low fuel costs and the anticipation of a further surge in air travel demand in the upcoming summer season. Southwest Airlines’ (LUV - Free Report) management continues to expect a strong adjusted profit for the current year, driven by upbeat air travel demand (mainly for leisure).

Meanwhile, United Airlines’ (UAL - Free Report) management announced that its chief financial officer or CFO, Gerald Laderman would retire next year. Allegiant Travel Company (ALGT - Free Report) was also in the news, courtesy of the ratification of the deal with the International Brotherhood of Teamsters or IBT, representing its flight dispatchers.

Recap of the Past Week’s Most Important Stories

1. American Airlines, currently carrying a Zacks Rank #3 (Hold), now expects total revenue per available seat miles (a measure of unit revenue) to decline 1-3% from second-quarter 2022 actuals (earlier estimate was for a 2-4% decline). Driven by upbeat demand, adjusted operating margin is now anticipated in the 12.5-14.5% band (earlier guidance:11-13%). Average fuel cost per gallon is now expected in the range of $2.55-$2.65 (earlier guidance: $2.65-$2.75).

AAL lifted its second-quarter earnings per share (excluding net special items) view and now expects the same to be in the $1.45-$1.65 range (earlier guidance: $1.20-$1.40). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AAL was also in the news recently, courtesy of its agreement in principle with its pilot union, Allied Pilots Association. That update was covered in detail in our previous week’s write-up.

2. United Airlines’ CFO Gerry Laderman stated that he intends to retire in 2024. The company, which will undertake a thorough search process to find a replacement for Laderman, said that the incumbent is expected to retire no later than Sep 30, 2024. To facilitate a smooth transfer of power, Laderman will discharge his current responsibilities until the effective date of UAL appointing his successor. After that, he will serve as executive vice president, Finance until his planned retirement next year.

3. While ratifying the deal with IBT, 95.8% of Allegiant’s flight dispatchers voted in its favor. Currently, 50 flight dispatchers, coordinators and instructors are employed at Allegiant. The existing collective bargaining agreement was due for amendment on May 31, 2024. It has been in effect since Apr 25, 2019. The ahead-of-schedule ratification is a major positive.

4. For second-quarter 2023, LUV still expects available seat miles to improve 14% from the year-ago reported figure. Economic fuel costs per gallon are expected to be $2.45 to $2.55. LUV still expects CASM, excluding fuel, oil and profit-sharing expenses, and special items, to increase 5-8% in the second quarter from the comparable period in 2022. Interest expenses are expected to be $65 million in the second quarter. Revenue per available seat miles is expected to decrease 8-10% year over year (earlier guidance was for a 8-11% decrease). LUV continues to expect solid profits in the second quarter and full-year 2023, both excluding special items.


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 green over the past week, resulting in the NYSE ARCA Airline Index gaining 1.7% to $64.42. Over the course of the past six months, the NYSE ARCA Airline Index appreciated 7.2%.

What’s Next in the Airline Space?

Investors are looking forward to the May traffic reports of the likes of Ryanair Holdings (RYAAY - Free Report) . Upbeat air travel demand is likely to have aided Ryanair’s May traffic numbers.


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