Airline Stock Roundup After Q3 Earnings

From Zacks: In the past week, Latin American carrier — GOL Linhas Aereas Inteligentes S.A. (GOL – Free Report) — reported wider-than-expected loss per share for third-quarter 2018. Results were hurt by high costs and currency-related headwinds.

On the non-earnings front, Delta Air Lines, Inc. (DAL – Free Report) released its traffic numbers for October. While traffic increased, load factor (percentage of seats filled with passengers) declined as traffic growth was outpaced  by capacity expansion. Expansion-related updates from United Continental Holdings, Inc. (UAL – Free Report) and Southwest Airlines Co. (LUV – Free Report) also grabbed headlines over the past week.

(Read the last Airline Stock Roundup for Oct 31, 2018)

Recap of the Past Week’s Most Important Stories

1. Gol Linhas’ incurred loss (excluding 27 cents from non-recurring items) of 32 cents per share, much wider than the Zacks Consensus Estimate of a loss of 10 cents. Meanwhile, net revenues came in at $734.3 million (R$2.89 billion), missing the Zacks Consensus Estimate of $737.2 million. Passenger revenues accounted for bulk of the top line and rose 8.9% on a year-over-year basis. This upside can be attributed to solid demand for air travel owing to a prospering Latin American economy. (Read more: Gol Linhas Q3 Loss Wider, Revenues Miss Estimates).

Gol Linhas carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. At Delta, consolidated traffic — measured in revenue passenger miles (RPMs) — came in at 18.78 billion, up 2.7% year over year. Consolidated capacity (or available seat miles/ASMs) climbed 3.2% to 21.97 billion on a year-over-year basis. Strong demand for air travel led to the increase in traffic.  (Read more: Delta’s October Traffic Rises, Load Factor Declines).

3. United Continental’s wholly-owned subsidiary — United Airlines — launched non-stop flights connecting the San Francisco International Airport to the capital of Tahiti, Pape’ete. The flights, operational since Oct 30, will fly every Tuesday, Thursday and Sunday from San Francisco. Moreover, the carrier has decided to extend the current seasonal service between the destinations to a year-round one from Mar 30, 2019. (Read more: United Continental Unit Initiates Flight Services in Tahiti).

4. In an effort to meet the surge in demand during the upcoming holiday season, Southwest Airlines has started operating new flights. To attain the objective of strengthening its presence in Northern California, this low-cost carrier aims to offer up to 98 departures (on a daily basis) to multiple destinations across the United States and Mexico by Nov 30, 2018. To this end, it has started operating flights between San Jose, Calif. and Tucson, Ariz. Southwest Airlines has also started operating daily flights between New York (LaGuardia) and New Orleans, apart from increasing the frequency of its flights on certain routes. This Dallas-based carrier has also decided to resume its seasonal daily operations on some international routes (like Austin and Cancun) as part of its expansion efforts.

5. In a bid to modernize its fleet, American Airlines Group Inc. (AAL – Free Report) has inked a firm order with Brazil’s Embraer — the world’s leading manufacturer of commercial planes up to 150 seats — for 15 E175 jets in a 76-seat configuration. The new jets will be delivered in 2020. The deal is valued at $705 million, based on current list prices. Following the latest order, American Airlines has a total of 104 E175 jets on order since 2013.

Price Performance

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

Company Past Week Last 6 months
HA 4.6% -1.1%
UAL 2.5% 32.5%
GOL 11.6% 15.4%
DAL 0.4% 6.5%
JBLU 4.1% 0.5%
AAL 1.1% -0.5%
SAVE 0.7% -6.7%
LUV 3.8% -0.9%
CPA 9.1% 4.3%
ALK 0.2% -0.9%

The table above shows all airline stocks traded in the green over the last week leading to the NYSE ARCA Airline Index increasing 3% over the past week. Over the course of six months, the sector tracker declined almost 1%.

What’s Next in the Airline Space?

Apart from the third-quarter earnings report of Azul S.A. (AZUL – Free Report) scheduled to be revealed on Nov 8, investors will look forward to October traffic reports from the likes of United Continental and Allegiant Travel Company (ALGT– Free Report) in the coming days.


The SPDR S&P Transportation ETF (XTN) was trading at $61.41 per share on Tuesday afternoon, up $0.48 (+0.79%). Year-to-date, XTN has declined -5.54%, versus a 3.24% rise in the benchmark S&P 500 index during the same period.

XTN currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #14 of 33 ETFs in the Industrials Equities ETFs category.


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