Capacity-related woes have been hurting Allegiant Travel Company (ALGT - Free Report) for quite some time. In fact, it is one of the factors behind the 3.4% decline in the company’s stock price so far this year.
The company’s May traffic report was no exception and showed substantial year-over-year rise in capacity.
Traffic for the total system that includes scheduled service and fixed fee contract — measured in revenue passenger miles (RPMs) — increased 10.9% on a year-over-year basis to 1.06 billion. System capacity, calculated in available seat miles (ASMs), expanded 10.7% to 1.23 billion in the same month.
With traffic growth marginally outpacing capacity expansion, load factor (percentage of seats filled with passengers) registered a mere 20 basis points year-over-year increase to 82%. This Las Vegas-based carrier transported 1.14 billion passengers in May, reflecting an improvement of 11.8% on a year-over-year basis.
Although traffic increased on a year-over-year basis in May, the rise in the metric compared unfavorably to the comparable reading a month ago, when traffic was up 12%. Capacity expansion was more in this month compared with 9% in April, giving rise to capacity-overexpansion related fears. The reading for May load factor too compared unfavorably to 83.2% in April.
Apart from capacity-related woes, the stock is still suffering from CBS News' report, 60 Minutes, alleging that it was facing a number of safety-related issues. The damaging television program was aired on Apr 15. The allegations are being investigated.
Also, escalating fuel costs are hurting the company’s bottom-line performance. In the first quarter, fuel costs increased in excess of 20% year over year to $2.18 per gallon. The metric has risen further subsequently. While the reading was $2.28 per gallon in April, it increased even higher to $2.44 per gallon in May.
With oil prices on an uptrend, it will not be surprising if Allegiant Travel revises its current-year fuel price guidance of $2.20 per barrel upward in the near future.
Zacks Rank & Stocks to Consider
Allegiant Travel has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are GATX Corporation (GATX - Free Report) , SkyWest Inc. (SKYW - Free Report) and Expeditors International of Washington, Inc. (EXPD - Free Report) . While GATX and SkyWest carry a Zacks Rank #2 (Buy), Expeditors sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of GATX, SkyWest and Expeditors have rallied in excess of 11%, 47% and 37%, respectively, in a year’s time.
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