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Airline Stock Roundup: LUV Expects Loss in Q1, DAL Sees Boeing Delivery Delay
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Production delays at Boeing (BA - Free Report) are hurting the fleet-related plans of airlines in the United States. This was echoed by airline heavyweights at the JPMorgan investor event. As a result of the crisis engulfing the plane manufacturer, airlines are being forced to cut their flight schedules. To this end, Southwest Airlines’ (LUV - Free Report) management stated that it was advised by Boeing to expect 46 737-8 jets in 2024 compared with the earlier stated 79 737 MAX jets, which included 58 MAX 8 planes.
Delta Air Lines (DAL - Free Report) does not expect the Boeing 737 Max 10 planes to be delivered before 2027. Previously, DAL anticipated the planes to get delivered from 2025 onward. American Airlines (AAL - Free Report) increased its fuel cost per gallon projection for first-quarter 2024. Copa Holdings’ (CPA - Free Report) February traffic report was impressive, driven by an upbeat air-travel demand.
1. Southwest Airlines’ management expects first-quarter 2024 available seat miles to improve 11% from the year-ago reported figure (the previous anticipation was for a 10% increase). Economic fuel costs per gallon are likely to be $2.95-$3 (earlier expectation was $2.7-$2.8). LUV expects cost per available seat miles, excluding fuel, oil and profit-sharing expenses, and special items, to increase 6% in the first quarter from the comparable period in 2023. Interest expenses are anticipated to be $65 million in the first quarter. LUV expects first-quarter 2024 revenue per available seat mile or RASM to be either flat or increase up to 2%. The earlier expectation was for a 2.5-4.5% increase. The reduced expectation is primarily due to higher-than-expected completion factors in February and March. Lower-than-expected close-in leisure passenger volume is also likely to hurt RASM. The company expects to incur a net loss in first-quarter 2024.
The delay in the delivery of 737 MAX jets by Boeing is prompting Southwest Airlines to re-evaluate all prior 2024 guidance, including the expectation on capex. As a result of the issues at Boeing, LUV expects the delivery schedule to be fluid and, therefore, intends to reduce capacity and re-optimize schedules, primarily for the back half of 2024, which will likely result in at least a one-point reduction in LUV’s 2024 capacity plans. While releasing its fourth-quarter 2023 results, the company’s management stated that 2024 capacity would improve 6% from the 2023 reported level.
2. Driven by high passenger volumes, revenue passenger miles (a measure of traffic) increased 17.5% on a year-over-year basis at Copa Holdings in February. To match the demand swell, CPA is increasing its capacity. In February, available seat miles increased 17% year over year. With traffic growth outpacing capacity expansion, the load factor (percentage of seats filled by passengers) improved to 86.3% from 85.9% in February 2023. Currently, CPA carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. Delta, which currently does not have any Boeing 737 MAX jet in its fleet, stuck to most of its first-quarter and 2024 outlook that it had provided while releasing the fourth-quarter 2023 results. Management now anticipates first-quarter 2024 total revenues (adjusted) to be in the top half of the year-over-year increase of 3-6% mentioned previously. First-quarter 2024 earnings are expected to be 25-50 cents per share. The adjusted operating margin in the March quarter is anticipated to be 5%. Adjusted earnings for 2024 are predicted to be $6-$7 per share.
4. American Airlines’ management expects fuel cost per gallon of $2.8-$2.9 for first-quarter 2024 (earlier projection was at $2.65-$2.85). AAL projects the March-end quarter's loss per share (excluding net special items) to be in the lower end of the 15-35 cents mentioned previously. First-quarter available seat miles are expected to increase 6.5-8.5%. Total revenue per available seat mile is expected to increase 3.5-5.5% in first-quarter 2024 from the first-quarter 2023 actuals. The company also maintained its 2024 guidance.
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 most airline stocks traded in the red over the past week. The NYSE ARCA Airline Index has declined 3.8% to $63.25. Over the course of the past six months, the NYSE ARCA Airline Index has gained 5.8%.
What’s Next in the Airline Space?
Stay tuned for further news updates in the space.
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Airline Stock Roundup: LUV Expects Loss in Q1, DAL Sees Boeing Delivery Delay
Production delays at Boeing (BA - Free Report) are hurting the fleet-related plans of airlines in the United States. This was echoed by airline heavyweights at the JPMorgan investor event. As a result of the crisis engulfing the plane manufacturer, airlines are being forced to cut their flight schedules. To this end, Southwest Airlines’ (LUV - Free Report) management stated that it was advised by Boeing to expect 46 737-8 jets in 2024 compared with the earlier stated 79 737 MAX jets, which included 58 MAX 8 planes.
Delta Air Lines (DAL - Free Report) does not expect the Boeing 737 Max 10 planes to be delivered before 2027. Previously, DAL anticipated the planes to get delivered from 2025 onward. American Airlines (AAL - Free Report) increased its fuel cost per gallon projection for first-quarter 2024. Copa Holdings’ (CPA - Free Report) February traffic report was impressive, driven by an upbeat air-travel demand.
Read the last Airline Roundup here.
Recap of the Recent & Most Important Stories
1. Southwest Airlines’ management expects first-quarter 2024 available seat miles to improve 11% from the year-ago reported figure (the previous anticipation was for a 10% increase). Economic fuel costs per gallon are likely to be $2.95-$3 (earlier expectation was $2.7-$2.8). LUV expects cost per available seat miles, excluding fuel, oil and profit-sharing expenses, and special items, to increase 6% in the first quarter from the comparable period in 2023. Interest expenses are anticipated to be $65 million in the first quarter. LUV expects first-quarter 2024 revenue per available seat mile or RASM to be either flat or increase up to 2%. The earlier expectation was for a 2.5-4.5% increase. The reduced expectation is primarily due to higher-than-expected completion factors in February and March. Lower-than-expected close-in leisure passenger volume is also likely to hurt RASM. The company expects to incur a net loss in first-quarter 2024.
The delay in the delivery of 737 MAX jets by Boeing is prompting Southwest Airlines to re-evaluate all prior 2024 guidance, including the expectation on capex. As a result of the issues at Boeing, LUV expects the delivery schedule to be fluid and, therefore, intends to reduce capacity and re-optimize schedules, primarily for the back half of 2024, which will likely result in at least a one-point reduction in LUV’s 2024 capacity plans. While releasing its fourth-quarter 2023 results, the company’s management stated that 2024 capacity would improve 6% from the 2023 reported level.
2. Driven by high passenger volumes, revenue passenger miles (a measure of traffic) increased 17.5% on a year-over-year basis at Copa Holdings in February. To match the demand swell, CPA is increasing its capacity. In February, available seat miles increased 17% year over year. With traffic growth outpacing capacity expansion, the load factor (percentage of seats filled by passengers) improved to 86.3% from 85.9% in February 2023. Currently, CPA carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. Delta, which currently does not have any Boeing 737 MAX jet in its fleet, stuck to most of its first-quarter and 2024 outlook that it had provided while releasing the fourth-quarter 2023 results. Management now anticipates first-quarter 2024 total revenues (adjusted) to be in the top half of the year-over-year increase of 3-6% mentioned previously. First-quarter 2024 earnings are expected to be 25-50 cents per share. The adjusted operating margin in the March quarter is anticipated to be 5%. Adjusted earnings for 2024 are predicted to be $6-$7 per share.
4. American Airlines’ management expects fuel cost per gallon of $2.8-$2.9 for first-quarter 2024 (earlier projection was at $2.65-$2.85). AAL projects the March-end quarter's loss per share (excluding net special items) to be in the lower end of the 15-35 cents mentioned previously. First-quarter available seat miles are expected to increase 6.5-8.5%. Total revenue per available seat mile is expected to increase 3.5-5.5% in first-quarter 2024 from the first-quarter 2023 actuals. The company also maintained its 2024 guidance.
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 most airline stocks traded in the red over the past week. The NYSE ARCA Airline Index has declined 3.8% to $63.25. Over the course of the past six months, the NYSE ARCA Airline Index has gained 5.8%.
What’s Next in the Airline Space?
Stay tuned for further news updates in the space.