The past week saw the Atlanta, GA-based Delta Air Lines (DAL Quick QuoteDAL - Free Report) kick-starting the fourth-quarter earnings season for the airline space. While the company’s earnings were in line with estimates, it posted better-than-expected revenues in the quarter. Moreover, both earnings and revenues declined on a year-over-year basis.

Chicago-based United Continental Holdings (UAL Quick QuoteUAL - Free Report) , on the other hand, outperformed with respect to the bottom line. However, the carrier saw its earnings deteriorating significantly on a year-over-year basis due higher costs.

On the non-earnings front, JetBlue Airways Corp. (JBLU Quick QuoteJBLU - Free Report) , Copa Holdings (CPA Quick QuoteCPA - Free Report) and GOL Linhas disclosed their respective traffic numbers for December.

(Read the last Airline Stock Roundup for Jan 11, 2017).

Recap of the Past Week’s Most Important Stories

1. Delta’s fourth-quarter earnings (excluding special items) of 82 cents per share met the Zacks Consensus Estimate. The bottom line, however, declined over 30% year over year. Operating revenues of $9,458 million beat the Zacks Consensus Estimate by 1.1%. Revenues declined marginally from the year-ago figure. (Read more: Delta Air Lines Q4 Earnings in Line, Revenues Beat).

2. United Continental Holdings’ fourth-quarter earnings (on an adjusted basis) of $1.78 per share beat the Zacks Consensus Estimate by 13 cents. The bottom line, however, plunged 29.9% year over year due to higher costs. Operating revenues of $9,052 million in the fourth quarter were just short of the Zacks Consensus Estimate of $9,059.4 million. Revenues increased marginally on a year-over-year basis.

Consolidated passenger revenue per available seat mile (PRASM or unit revenues) declined 1.6% year over year to 12.41 cents. Yield on a consolidated basis dipped 1.2% from the fourth quarter of 2015, while passenger revenues increased marginally to $7,761 million. Total operating expenses, excluding special items, grew 3.2% year over year to $8.1 billion. Consolidated unit cost or cost per available seat mile (CASM) – excluding fuel, third-party business expenses and profit sharing – increased 4.1% year over year, primarily due to the labor deals ratified.

United Continental expects unit revenues to remain almost flat in the first quarter of 2017. Capacity for 2017 was also projected to expand in the range of 1–2%.  The company expects pre-tax margin (adjusted) in the range of 0.5–2.5% in the first quarter of 2017. Unit costs in the first quarter are projected to increase in the band of 4.5% to 5.5% due to higher in labor costs.

3. American Airlines Group (AAL Quick QuoteAAL - Free Report) came out with an improved view on total revenue per available seat mile (TRASM) for the fourth quarter (detailed results will be out on Jan 27). The carrier now expects the metric to be in the range of flat to up 2% (on a year-over-year basis) in the fourth quarter. The view represents a marked improvement from the guidance issued last month, when it expected the metric in the band of a decline of 1% to an increase of 1%. The improved view was due to “improving yields” (Read more: Will American Airlines Return to Unit Revenue Growth in Q4?).

4. JetBlue’s traffic update for December reflected a significant increase in the metric. Revenue passenger miles (RPMs) – a measure of traffic – climbed 4.5% year over year to 4 billion. Average seat miles (ASMs) – a measure of capacity – grew 3.1% to 4.7 billion in Dec 2016. Load factor (percentage of seats filled by passengers) expanded 110 basis points (bps) to 84.1% in the month as traffic growth outpaced capacity expansion. Revenue per available seat mile for the month decreased approximately 1.5%.

5. GOL Linhas’ December traffic – measured in revenue passenger kilometers (RPK) – was 3.4 billion, down 3.7% from a year ago. Also, consolidated capacity (or available seat kilometers/ASKs) was down 5.7% on a year-over-year basis to 4.3 billion. The downside can be attributed to a 8.9% decline in international capacity. Load factor expanded 160 bps to 79% in Dec 2016 as traffic contraction was less than capacity decline.

6. Copa Holdings, S.A. revealed impressive traffic numbers for the month of December. RPMs improved 9% year over year to 1.6 billion. Load factor increased 510 bps to 81%. This was because traffic growth outpaced capacity expansion (2.2%) in the month for the Zacks Rank #2 (Buy) carrier. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months. 

The table above shows that airline stocks exhibited a mixed trend with respect to price over the past week. The NYSE ARCA Airline index gained, albeit marginally, to $111.65. Over the course of six months, the NYSE ARCA Airline index appreciated 22.72%.

What's Next in the Airline Space?

Hawaiian Holdings (HA Quick QuoteHA - Free Report) will unveil its fourth quarter results on Jan 24.

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