In the past week, Southwest Airlines LUV management stated that it expects revenue per available seat miles (RASM: a key measure of unit revenue) to increase in the 2-3% band in third-quarter 2024 (detailed results will be out on Oct. 24) from third-quarter 2023 actuals. The earlier expectation was flat to down 2% year over year.
Allegiant Travel ALGT expects third-quarter unit revenues to improve from what was previously expected owing to healthy booking trends. In line with its environmentally friendly approach, JetBlue Airways JBLU inked a Memorandum of Understanding or MOU with Aether Fuels, a venture-backed climate technology company. Following the completion of the acquisition of Hawaiian Airlines, Alaska Air Group ALK announced the expansion of its cargo division.
Recap of the Recent Most Important Stories
1. Southwest Airlines’ board announced a new share buyback plan worth $2.5 billion. As part of its growth strategy, LUV expects to deliver an estimated $500 million of run-rate cost savings in 2027. The company aims to achieve that by minimizing hiring, optimizing scheduling, improving corporate efficiency and capitalizing on supply chain opportunities. LUV also intends to upgrade its fleet and hopes to reach an average fleet age of five years in 2031. The airline intends to reduce average capital expenditures for aircraft to around $50 million through 2027. LUV reduced its third-quarter 2024 fuel cost per gallon guidance to the $2.50-$2.60 range compared with the $2.60-$2.70 range expected previously.
LUV currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
2. ALGT now anticipates its third-quarter 2024 capacity (measured in available seat miles) for scheduled service to increase 1.6% on a year-over-year basis. This marks an improvement from the prior expectation of an increase of 1.3%. Operating margin is now expected to decline in the 0.5-1.5% range, which marks an improvement over the prior forecast of a decline in the 4.5-6.5% band. Unit revenues are now expected to be down roughly 5.5% year over year compared with the previous estimation of a 7.5% decline.
3. Ian Morgan has been selected as the new vice president of the cargo division of Alaska Airlines. Morgan will oversee the day-to-day cargo operations and the nearly 600 employees of the division. He will also be responsible for managing the continued growth of ALK’s cargo business, operated by both Hawaiian Airlines and Alaska Airlines following the merger. ALK will hold its investor day on Dec. 10, 2024, to throw more light on the integration process.
ALK was also in the news recently due to improved third-quarter 2024 earnings per share guidance. The news was covered in detail in the previous week’s write-up. The completion of the Hawaiian Airlines acquisition was also discussed there.
4. Per the MOU with JBLU, Aether will supply the latter with sustainable aviation fuel on the commencement of commercial production. The MOU strengthens Aether’s relationship with JetBlue, which began when its venture capital subsidiary, JetBlue Ventures, invested in Aether’s convertible note and Series A financings. Aether’s technology or Aether Aurora, makes use of a range of waste carbon feedstocks that do not compete with food or feed value chains.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
Image Source: Zacks Investment Research
The NYSE ARCA Airline Index increased 5.7% to $58.45, as almost all stocks in the table above traded in the green. Over the past six months, the NYSE ARCA Airline Index decreased by 10.7%.
What’s Next in the Airline Space?
Investors will await further updates on the tussle between LUV’s management and Elliott Investment Management. More details regarding ALK’s Hawaiian Airlines acquisition are also expected in the coming days.
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Free: See Our Top Stock And 4 Runners UpSouthwest Airlines Co. (LUV) : Free Stock Analysis Report
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
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