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Airline Stock Roundup: Gol's Q4 Earnings Miss, Coronavirus Fears & More

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In the past week, Latin American carrier Gol Linhas Aereas Inteligentes GOL announced fourth-quarter 2019 results wherein it reported lower-than-expected earnings per share. However, the bottom line improved on a year-over-year basis with unit costs declining on the back of improved efficiency and higher capacity.

Meanwhile, fears related to the coronavirus persisted to rock the airline stocks with United Airlines (UAL - Free Report) withdrawing its guidance for 2020 as the fatal virus is spreading its tentacles beyond China. Due to this latest health peril, Delta Air Lines DAL temporarily halted its service to and from South Korea. Meanwhile, JetBlue Airways JBLU waived change and cancellation fees as air-travel demand weakened due to the coronavirus woes. Additionally, the International Air Transport Association (IATA) expects airline revenues for 2020 to be hurt in excess of $29 billion due to this adversity.

American Airlines Group (AAL - Free Report) was another newsmaker in the past week as it took a significant step toward ending its long-standing feud with Qatar Airways by virtue of its decision to renew the codeshare partnership.

 

(Read the Last Airline Stock Roundup here).

Recap of the Past Week’s Most Important Stories

1. Gol Linhas’ fourth-quarter 2019 earnings (excluding 1 cent from non-recurring items) of 43 cents per share fell short of the Zacks Consensus Estimate by a couple of cents. However, net revenues of $924.3 million rose 9.9% year over year in the reported quarter. Passenger revenues accounting for bulk (94.2%) of the top line also improved 20.1% on a year-over-year basis as demand for air travel remained strong. The carrier expects 2020 net revenues of R$15.4 billion (Read more: Gol Linhas Q4 Earnings Lag Estimates, Improve Y/Y).

Gol carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. United Airlines became the first U.S. airline to withdraw its projections for 2020 due to the coronavirus outbreak. Reportedly, the airline is at maximum risk among U.S. carriers in terms of its passenger traffic dwindling significantly due to this health hazard. This is because of its international revenues accounting for a higher portion of the top line than its peers like Delta and American Airlines. However, United Airlines hopes to achieve its 2020 earnings target of $11-$13 per share, provided the outbreak is contained by mid-May and demand on the trans-Pacific routes resumes normalcy in five months. (Read more: United Airlines Withdraws 2020 View Due to Coronavirus Fears).

3. The IATA anticipates a 13% drop in passenger demand for the Asia-Pacific carriers. Given that these airlines were expected to witness 4.8% growth, the net effect of this plunge in demand indicates an 8.2% year-over-year decrease in 2020 demand. This contraction in demand is equivalent to a loss of $27.8 billion in 2020 revenues for airlines in the Asia-Pacific region. Majority of this loss will be borne by the Chinese carriers. (Read more: Coronavirus May Slash $29.3B From Airlines' 2020 Revenues).

4 Delta will temporarily reduce the number of flight services to and from South Korea due to the spread of the deadly coronavirus. Notably, South Korea currently has 1,595 confirmed cases of the infection. This Atlanta-GA based airline will be suspending its service between Minneapolis/St. Paul and Seoul-Incheon effective Feb 29, 2020 through Apr 30. Additionally, the airline will lower its flight frequency connecting Seoul with Atlanta and that between Detroit and Seattle to five times weekly through Apr 30. With these fight cancellations, Delta will operate 15 flights weekly from the United States to Korea compared with its usual 28 flights. Also, the airline pushed back the date to launch its service between Seoul-Incheon and Manila from Mar 29 to May 1.

Due to this health crisis, JetBlue announced a waiver in its change and cancel fees for all new flight bookings. Passengers can avail of the privileges on bookings through Mar 11 for the journey completed by Jun 1, 2020.  

5. American Airlines and Qatar Airways aim to boost connectivity between the United States and Qatar through the renewed codeshare deal. The deal will, however, have to be approved by the authorities in Qatar as well as the United States before it becomes effective. Moreover, management at American Airlines stated that it will start exploring the option of commencing flights between the United States and Doha once the codeshare deal takes effect. (Read more: American Airlines, Qatar Airways Bury the Hatchet via New Deal).

Performance

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

The table above shows that all airline stocks have traded in the red over the past week as the dreaded coronavirus spread to countries other than China induced the NYSE ARCA Airline Index to shed 16.3% of its value. Over the course of six months, the sector tracker has appreciated 2.2%.

What's Next in the Airline Space?

Investors will await the fourth-quarter 2019 earnings report of LATAM Airlines LTM, scheduled to be released on Mar 3.

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