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Airline Stock Roundup: Coronavirus Woes Disrupt GOL's Traffic, DAL, LUV in Focus

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In the past week, Latin American carrier Gol Linhas GOL reported a massive decline in March traffic and occupancy rate as coronavirus persistently paralyzed air-travel demand.  Meanwhile, this U.S. based Delta Air Lines DAL expects its second-quarter 2020 (Apr-Jun) revenues to shrink as much as 90% in the face of plummeting passenger revenues induced by the COVID-19 pandemic.

Moreover, Alaska Air Group’s ALK wholly owned subsidiary Alaska Airlines announced further capacity cuts for April and May to combat the extremely bleak air-travel demand scenario. Due to the coronavirus-caused turbulence in the airline space, capacity-cut updates  were also available in the previous week.

Across the pond, Irish low-cost carrier Ryanair Holdings RYAAY reported a 48% year-over-year decline in March traffic to 5.7 million with widespread travel restrictions in place due to the pandemic.

Summary of the Past Week’s Key Headlines

1. Due to the coronavirus-led uncertainty, Gol Linhas suspended its guidance for 2020 and2021. Moreover, this Zacks Rank #4 (Sell) company announced cost-cutting measures like tax deferrals to drive its bottom line in the face of dwindling revenues. Meanwhile, its March consolidated traffic, measured in revenue passenger kilometers, declined 29.7%. With Gol Linhas trimming capacity to compensate dwindling demand, consolidated capacity (measured in available seat miles) contracted 22.2%.Occupancy rate fell to 71.6% from 79.3% in March 2019.

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

2. Delta expects its second-quarter 2020 performance to be worse than the first as coronavirus pandemic concerns are on the rise.  Meanwhile, Delta is burning more than $60 million in cash each day but hasn’t “seen the bottom” yet. With crumbling air-travel demand, the airline will continue to slash capacity while maintaining a network of only essential services. In April, the carrier will reduce capacity by at least 80% with 115,000 flight cancellations. Meanwhile, Delta submitted its application for the coronavirus relief grant.

3. Alaska Airlines plans to lower April and May capacity by 80% as the carrier continues to experience more than 80% decline in demand amid the coronavirus crisis. With the health hazard continuing unabated, the airline expects to make “sizeable cuts” in June and beyond as well. Previously, Alaska Airlines was expected to lower capacity for April and May by 70%.To cope with this deep crisis, the carrier took several cost-reduction initiatives

4 American Airlines (AAL - Free Report) aims to cancel more flights to and from New York City area airports due to “rapidly evaporating" travel demand as COVID-19 cases increase in the region. Notably, the Centers for Disease Control and Prevention (CDC) issued an advisory warning against all non-essential travel to and from New York, Connecticut and New Jersey. American Airlines will now operate only 13 daily flights from New York's JFK and LaGuardia airports and New Jersey's Newark airport between Apr 9 and May 6.

5. As a result of the coronavirus-triggered difficulty, Ryanair expects its fiscal 2020 Profit After Tax in the €950-€1,000 million band(which is at the lower end of the earlier guided range). The company will release its fiscal 2020 results on May 18.  With flights mainly operating for emergency purposes, Ryanair currently runs less than 20 flights a day, reflecting an enormous 99% reduction from the 2,500 plus flights that took to the skies daily prior to the COVID-19 outbreak.

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 most airline stocks have traded in the red over the past week, inducing a 5.8% decline in the NYSE ARCA Airline Index to $42.63. This downtrend was due to the coronavirus-induced fast-vanishing air-travel demand. Over the course of past six months, the NYSE ARCA Airline Index has tanked 56.7%.

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