Markets

Airline Stock Roundup: DAL Posts Q2 Loss, UAL's Warns of Job Loss & More

In the past week, Delta Air Lines DAL kicked off the second-quarter 2020 earnings season for the airline stocks. The carrier incurred a loss as the coronavirus-led weak air-travel demand induced a steep 94% fall in passenger revenues. Enplaned passengers plunged 93% due to softness in air-travel demand.

United Airlines UAL too grabbed headlines in the past week, thanks to its warning of trimming headcount by 36,000 in its U.S.-based frontline positions as the recent spike in coronavirus cases in the country due to an anticipated second wave negates the recent recovery in air-travel demand. The furloughs are expected to commence on or after Oct 1 and may continue through 2020-end. Notably, U.S. carriers including United Airlines cannot lay off employees until Sep 30 as they are receiving financial assistance under the CARES Act.

Meanwhile, Allegiant Travel Company ALGT reported a 45% year-over-year decrease in June traffic due to coronavirus-induced travel woes. However, Latin American carrier Azul's AZUL June traffic improved compared with the May reading. Update on the June traffic report of another Latin American carrier, Gol Linhas GOL, is available in the last week's write-up.

Recap of the Past Week's Most Important Stories

1. Delta incurred a loss (excluding $4.58 from non-recurring items) of $4.43 per share in the June quarter, wider than the Zacks Consensus Estimate of a loss of $3.97. Revenue passenger miles (a measure of air traffic) tumbled 94% to 3,621 million. With the currently Zacks Rank #3 (Hold) Delta making significant capacity cuts to compensate for the coronavirus-induced sharp decrease in traffic, capacity (measured in available seat miles) contracted 85% to 10,596 million. With the fall in traffic outpacing the capacity reduction, load factor was down to 34% from 88% a year ago. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

2. Per a CNBC report, United Airlines reached an agreement with its pilots' union, representing approximately 13,000 pilots, on voluntary furloughs and early-retirement packages. This action follows the carrier's warning to make roughly 45% of its workforce redundant in the United States.

3. At Allegiant Travel Company, traffic for scheduled service, measured in revenue passenger miles (RPMs), slumped 45% on a year-over-year basis to 745.6 million. Scheduled capacity, calculated in available seat miles (ASMs), dropped 17.5% to 1301.5 million in the month. Since the decline in traffic exceeded capacity contraction, load factor plummeted 2860 basis points to 57.3%.

4. At Azul, consolidated traffic in June surged 43.6% on a month-over-month basis. Apart from a 27.8% rise in international traffic, the metric soared 47% on the domestic front, thereby perking up the overall figure. Consolidated capacity jumped 37.1% owing to 43.9% and 9.7% growth in domestic and international capacity, respectively, from the past-month levels. Consolidated load factor climbed to 75.5% .

5. Per a CNN Business report, American Airlines AAL postponed the resumption of Dallas-Hong Kong flights from Jul 9 to Aug 5 following the Hong Kong government's mandatory coronavirus testing rules for airline crew members.

Performance

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


The table above shows that most airline stocks traded in the red in the past week due to the spurt in coronavirus cases across the United States, which halted the rebound in air-travel demand. This downside caused a 1.8% slip in the NYSE ARCA Airline Index to $52.04. Over the course of the past six months, the NYSE ARCA Airline Index has dived 52.7%.
 

What's Next in the Airline Space?

Investors will keenly await the second-quarter 2020 earnings release of United Airlines on Jul 21.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

 


Click to get this free report

Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

Gol Linhas Aereas Inteligentes S.A. (GOL): Free Stock Analysis Report

United Airlines Holdings Inc (UAL): Free Stock Analysis Report

American Airlines Group Inc. (AAL): Free Stock Analysis Report

Allegiant Travel Company (ALGT): Free Stock Analysis Report

AZUL SA (AZUL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More