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Airline Stock Roundup: DAL's Investor Day, JBLU's November Traffic Report & More

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In the past week, Delta Air Lines’ (DAL - Free Report) investor day presentation disappointed investors as the carrier’s projection for 2019 earnings per share failed to match expectations. The company anticipates EPS between $6 and $7.

Delta’s investor day apart, Southwest Airlines (LUV - Free Report) trimmed its fuel cost outlook for the fourth quarter of 2018 due to the current downward trend in oil prices. Additionally, the likes of JetBlue Airways (JBLU - Free Report) and Alaska Air Group (ALK - Free Report) unveiled the respective November traffic reports in the past few trading days.

JetBlue’s traffic data displeased investors as its load factor (percentage of seats filled by passengers) declined in November as traffic growth was outpaced by capacity expansion. United Airlines, the wholly owned subsidiary of United Continental Holdings (UAL - Free Report) , was also in news by virtue of its decision to add international flights from San Francisco.

(Read the last Airline Stock Roundup for Dec 12, 2018)

Flashbacks of the Past Week’s Top Stories

1. Southwest Airlines now expects fourth-quarter fuel costs between $2.25 and $2.30 per gallon (earlier prediction was in the $2.30-$2.35 range). The current estimate includes premium expenses to the tune of 7 cents per gallon and an expected amount of 7 cents toward favorable cash settlements resulting from fuel derivative contracts. This low-cost carrier reiterated its fourth-quarter views for other key metrics like unit revenues, non-fuel unit costs and capacity. Southwest Airlines is not the only carrier to lower its fuel cost guidance for the final quarter of 2018. Last month, Spirit Airlines (SAVE - Free Report)    took a similar action in response to the declining oil prices (read more: Southwest Cuts Q4 Fuel Cost View, Joins Alaska Air, Spirit).

2. Delta envisions 2019 revenues to grow 4-6%. Meanwhile, with forecast for fuel prices to further decrease in 2019, the airline assumes an approximate $300-million cut in fuel expenses. Non-fuel unit costs are likely to inch 1% up in the year. Also, capital expenditures might total $4.5 billion next year (read more: Delta Shares Decline More Than 4% Post Investor Day).

Delta carries a Zacks Rank #2 (Buy). 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) — increased 9.7% year over year to 4.11 billion. Consolidated capacity (or available seat miles/ASMs) expanded 10.6% to 4.92 billion on a year-over-year basis. The company now anticipates revenue per available seat mile (RASM) to increase between 1.5% and 3.5% in the fourth quarter of 2018. Previous expectation was in the band of 1-4% rise (read more: JetBlue's Load Factor Declines in November, Stock Dips).

4. At Alaska Air Group, November traffic rose 1% while capacity grew 1.2%. The carrier now anticipates fourth-quarter revenue per available seat mile in the range of 12.70-12.80 cents compared with the past projection of 12.60-12.80 cents. This revised estimate represents a year-over-year change of 4-5%. Additionally, the company now foresees fourth-quarter fuel costs per gallon to be $2.36 per gallon compared with the earlier guided value of $2.33.

5. United Airlines announced the largest international route expansion in San Francisco.  As part of this move, the carrier will start operating a second flight (four times a week) from Apr 1, 2019, connecting Seoul and San Francisco. Moreover, next year, it will start a year-round nonstop service to Amsterdam, Auckland and Tahiti from San Francisco. The airline’s capacity expansion for 2019 is estimated to be between 4% and 6%.

 

Price Performance

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

 

 

The table above shows that majority of the airline stocks traded in the red over the past week, causing a 3.8% decline in the NYSE ARCA Airline Index. However, over the course of six months, the sector tracker has increased 3.6% due to impressive gains at the likes of GOL Linhas (GOL - Free Report) and United Continental.

What's Next in the Airline Space?

Stay tuned for the usual news updates in this space. Focus will also be on the movement of oil prices, which are very chaotic of late, given the inverse relationship between fuel costs and the health of airline stocks.

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