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Airline Stock Roundup: GOL, CPA Q1 Earnings, JBLU's Traffic Report & More

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Last week, Latin American carriers — GOL Linhas Aereas Inteligentes S.A. (GOL - Free Report) and Copa Holdings, S.A. (CPA - Free Report) — reported contrasting financial numbers for the first quarter of 2018. While Copa Holdings outperformed with respect to earnings per share and revenues driven by the improvement in the Latin American economy, GOL Linhas posted in-line earnings and lower-than-expected revenues.

On the non-earnings front, JetBlue Airways Corp. (JBLU - Free Report) reported impressive traffic numbers for April. Load factor (% of seats filled by passengers) increased at this low-cost carrier as traffic growth outpaced capacity expansion. JetBlue was also featured in the news by virtue of its agreement in principle with its pilots’ union — Air Line Pilots Association.

Meanwhile, average airfares in the U.S. declined the most in four years according to data released by the Bureau of Labor Statistics. Even though, low air fares spell good news for fliers, it is likely to hurt the top line of airline companies. The deal inked by the United Arab Emirates with the United States also invited attraction and should go a long way in resolving the long-standing dispute between U.S. carriers and their Gulf counterparts.

In 2015, leading U.S. carriers — American Airlines Group Inc. (AAL - Free Report) , United Continental Holdings Inc. (UAL - Free Report) and Delta Air Lines Inc. (DAL - Free Report) — had alleged that state-owned carriers like Etihad Airways and Emirates gained from the massive subsidies and other benefits. Per U.S. carriers, the government subsidies were unfair in nature, which denied a level playing field to them. The above agreement aims at allaying such fears, with the United Arab Emirates agreeing to increase financial transparency.

Transportation - Airline Industry 5YR % Return

 

Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for May 09, 2018).

Recap of the Past Week’s Most Important Stories

1. GOL Linhas’ earnings (excluding 16 cents from non-recurring items) of 42 cents per share were in line with the Zacks Consensus Estimate and the year-ago figure. Net revenues came in at $862.2 million (R$3.0 billion), missing the Zacks Consensus Estimate of $919.1 million. However, the top-line figure increased on a year-over-year basis.

Passenger revenues accounted for bulk of the top line and improved significantly year over year. The upside was driven by the solid demand for air travel owing to improvement in the Latin American economy (Read more: GOL Linhas Q1 Earnings In Line, Revenues Miss Estimates).

2. Copa Holdings’ earnings per share of $3.22 surpassed the Zacks Consensus Estimate of $2.78. The bottom-line figure surged 32.5% on a year-over-year basis. Quarterly revenues too increased 15.9% year over year to $715 million and outpaced the consensus mark of $692 million. The year-over-year improvement in the top line was primarily owing to 16.3% growth in passenger revenues.

While passenger unit revenue per available seat mile (PRASM) climbed 7.2%, yield per passenger mile improved 5.3%. Passenger traffic (on a consolidated basis) rose 10.4% and capacity was up 8.4% in first-quarter 2018. Load factor expanded 150 basis points to 83% as traffic growth outweighed capacity increase.

Additionally, unit revenue per available seat mile (RASM) improved 7.2%. This apart, operating cost per available seat mile (CASM), excluding fuel, increased 1.1% in the reported quarter. The metric, including fuel costs, was up 5.6%.

On a separate note, the carrier unveiled its traffic report for April. Load factor declined 10 basis points to 82.7% as capacity expansion (12.1%) outpaced traffic growth (10.8%) in the month for this Zacks Rank #3 (Hold) carrier. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3. At JetBlue, traffic — measured in revenue passenger miles (RPMs) — rose 5.7% year over year to 4.3 billion. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) expanded 5.3% to 5.02 billion (Read more: JetBlue's Traffic & Load Factor Increase in April).

Also, JetBlue moved a step closer to finalizing a pay-related deal with its pilots, after it inked an agreement in principle. However, the deal needs to be ratified before it becomes effective. On implementation, the same will lead to significant increase in labor costs. This, in turn, will limit bottom-line growth further as fuel costs are already on the rise.

4. Although fuel costs have been increasing, air fares in the United States declined in April. In April, ticket prices decreased 2.7% on a month-on-month basis, thus making it the sharpest fall in four years. Moreover, in April, average air fares (unadjusted) declined 6.9% from the comparable figure a year ago. Notably, the April reading comes after two successive months of increase in airfares (Read more: Air Tickets Get Cheaper in April Despite High Fuel Costs).

5. At Alaska Air Group (ALK - Free Report) , RPMs came in at 4.6 billion, up 5.8%. ASMs rose 8.7% to 5.46 billion. Load factor contracted 230 bps to 84.6% as capacity expansion outpaced traffic growth.

On a separate note, Alaska Air Group’s subsidiary, Alaska Airlines, is reportedly aiming to do away with its New York pilot base in September. The move will see more than 100 pilots relocating to California as the carrier aims to strengthen its West Coast fleet.

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

2.8%

-1.2%

UAL

3.4%

15.9%

GOL

-4.5%

1.3%

DAL

1.5%

3.8%

JBLU

1.6%

-6.2%

AAL

2.7%

-9.4%

SAVE

0.5%

-2.9%

LUV

0.3%

-6.5%

CPA

-0.6%

-10.7%

ALK

-3.1%

-10.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that most airline stocks traded in the green in the past week. However, the gains were muted in nature. Shares of GOL Linhas have declined appreciably (4.5%) following its below-par earnings report. Consequently, the NYSE ARCA Airline Index decreased over the past week to the tune of almost 1%. Over the last six months, the sector tracker lost 3.6%.

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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