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Airline Stock Roundup: GOL Linhas, Copa Holdings Q2 Earnings, A4A's Bullish Labor Day Forecast & More

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The past week saw Latin American carriers – GOL Linhas (GOL - Free Report) and Copa Holdings (CPA - Free Report) – reporting their respective earnings numbers for second-quarter 2017. Even though GOL Linhas reported better-than-expected earnings per share, the bottom line contracted on a year-over-year basis due to elevated costs. Copa Holdings topped expectations, both with respect to earnings and revenues.

On the non-earnings front, the last week saw premier trade organization – Airlines for America (A4A) – revealing a bright forecast for U.S. carriers. It is anticipated that the U.S. airlines will make hay during the upcoming Labor Day travel period (Aug 30-Sep 5), with travel demand projected to increase 5% on the back of low air fares and improving disposable income.

Moreover, the likes of American Airlines Group (AAL - Free Report) , Southwest Airlines Co. (LUV - Free Report) and JetBlue Airways Corp. (JBLU - Free Report) announced their respective July traffic numbers. While American Airlines and JetBlue witnessed a decline in their respective load factors (percentage of seats filled by passengers), the measure improved at Southwest, as capacity expansion was outweighed by traffic growth for the month at the Dallas-based low-cost carrier.

On the price front, the NYSE ARCA Airline Index decreased marginally to $110.18 over the past week. 

Transportation - Airline Industry 5YR % Return

 

Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for Aug 09, 2017).

Recap of the Past Week’s Most Important Stories

1. GOL Linhas’ second-quarter 2017 earnings per share of 24 cents per share compared favorably to the Zacks Consensus Estimate of a loss of 60 cents. However, the bottom line plummeted 51.02% on a year-over-year basis due to higher expenses on aircraft fuel. Net revenue, comprising cargo and passenger revenues, came in at $696.2 million (R$2.2 billion), up significantly year over year. While cargo revenues increased 16.7%, passenger revenues improved 5.3% (read more: GOL Linhas Q2 Earnings Decline, Revenues Rise Y/Y).

This apart, the carrier reported air traffic numbers for the month of July. Consolidated traffic – measured in revenue passenger kilometers (RPK) – increased 6.3% to 3.65 billion in July 2017 from 3.44 billion, recorded a year ago. On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) expanded 7.9% to 4.46 billion, thanks to the rise of 7.9% and 8% in domestic and international capacity, respectively (read more: GOL Linhas' July Traffic Rises, Load Factor Falls).

2. According to a forecast made by A4A, approximately 16.1 million passengers are expected to avail services of the U.S. airlines on Labor Day this year. The report states that approximately 15.4 million people were estimated to have taken to the skies in the Labor Day travel period last year. To meet the surge in demand, carriers are looking to expand their capacity, with 133,000 seats projected to be added per day. According to the report, Sep 1 is expected to be the busiest day for air travel in the period, with Aug 31 and Sep 4 projected to come in second and third respectively.

3. Copa Holdings’ second-quarter earnings (on an adjusted basis) of $1.48 per share beat the Zacks Consensus Estimate of $1.42. Earnings also came well above the year-ago figure of 51 cents per share. Quarterly revenues improved 16.8% year over year to $578.1 million. Revenues also beat the Zacks Consensus Estimate of $548 million.

The year-over-year increase in the top line was primarily due to a 17.5% improvement in passenger revenues. Passenger unit revenue per available seat mile (PRASM) improved 8.2%, whereas yield per passenger mile advanced 3%. Operating cost per available seat mile, excluding fuel, increased marginally in the quarter. Unit revenue per available seat mile (RASM) improved 7.5%.

Passenger traffic (on a consolidated basis) climbed 14.1% and capacity was up 8.6% during the quarter. Load factor expanded 390 basis points (bps) to 82.2% as traffic growth outweighed capacity expansion of this Zacks Rank #3 (Hold) carrier. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

4. American Airlines witnessed a 0.8% rise in traffic, measured in revenue passenger miles (RPMs), for the month of July to 21.9 billion. Consolidated capacity (or available seat miles/ASMs) inched up 1.9% to 26.0 billion.  However, the load factor decreased to 84.3% from 85.2% recorded in July 2016, as capacity expansion outpaced traffic growth (read more: American Airlines' July Load Factor Falls, Stock Declines).

5. Southwest Airlines posted a 6% rise in July traffic to around 12.4 billion. Capacity increased 5.5% to 14.2 billion. Load factor improved 40 basis points (bps) to 87.3% in July. The company continues to expect third-quarter 2017 RASM growth of around 1% (read more: Southwest Airlines July Traffic Rises, View Intact).

6. JetBlue Airways posted a significant rise in air traffic for July. Traffic improved 5.1%, while capacity expanded 5.9%, leading to a decline in load factor for the month. The low-cost carrier registered a completion factor (system wide) of 97.5% in the month, with 63.5% flights on schedule (read more: JetBlue Airways' July Load Factor Falls, Stock Down).

7. At Spirit Airlines (SAVE - Free Report) traffic improved 17.8%, while capacity expanded 22.7%. Load factor decreased to 86.3% from 89.8% recorded last July. The metric declined as traffic growth was outpaced by capacity expansion for the month (read more: Spirit Airlines' July Traffic Increases, Load Factor Slips).

Performance

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

Company

Past Week

Last 6 months

HA

1.54%

-15.22%

UAL

-0.45%

-11.51%

GOL

-0.83%

18.6%

DAL

-0.16%

-1.8%

JBLU

1.33%

10.03%

AAL

-2.9%

3.32%

SAVE

-0.62%

-27.7%

LUV

1.2%

-2.02%

CPA

0.22%

19.8%

ALK

-1.51%

-13.22%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that majority of airline stocks traded in the red over the past week, although the loses were muted in nature. Over the course of six months, the NYSE ARCA Airline Index depreciated 1.62%. Shares of Hawaiian Holdings (HA - Free Report) depreciated the most (15.22%) in this period.

What's Next in the Airline Space?

With the earnings season over, stay tuned for the usual news updates in the space.

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