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Airline Stock Roundup: Earnings Beat at Azul; LUV, JBLU, HA in Focus

Zacks Equity Research
Updated

In the past week, Latin American carrier — Azul S.A. AZUL — reported impressive third-quarter 2018 results, wherein earnings and revenues outpaced the respective estimate. However, the bottom line decline year over year due to high fuel costs and devaluation of the Brazilian Real.

On the non-earnings front, key airline players like Southwest Airlines LUV, JetBlue Airways Corporation JBLU and Hawaiian Airlines — the wholly owned Hawaiian Holdings HA —released the respective traffic reports for October.

While JetBlue reported an increase in load factor (% of seats filled by passengers), the metric decreased at Hawaiian and Southwest Airlines as capacity expansion outweighed traffic growth in the month.

(Read the last Airline Stock Roundup for Nov 06, 2018)

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Recap of the Past Week’s Most Important Stories

1. Due to headwinds like rising fuel prices and depreciation of the Brazilian real, Azul trimmed its current-year operating margin guidance. The carrier projects operating margin to be around 9%. Per the previous outlook, the metric was anticipated between 9% and 11%. Furthermore, unit costs are now predicted to decline around 1% in 2018 compared with the previous projection of 1-3% fall. (Read more: Azul Surpasses Earnings and Revenue Estimates in Q3).

2. At Southwest Airlines, traffic (measured in revenue passenger miles or RPMs) rose 6% to around 11.32 billion, while capacity or available seat miles (ASMs) expanded 7.7% to 13.4 billion. Passenger count grew 4.2% to 14.07 million. (Read more: Southwest Airlines Load Factor Declines in October).

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

3. At JetBlue, traffic increased 9.5% year over year to 4.06 billion. Consolidated capacity expanded 8.9% to 4.9 billion on a year-over-year basis. This low-cost carrier registered a completion factor (system wide) of 99.4%, with 78.8% flights on schedule. In the first 10 months of 2018, the carrier posted a 7.4% rise in RPMs while ASMs grew 6.4%, both on a year-over-year basis. The company’s fourth-quarter revenue per available seat mile is still anticipated to increase in the range of 1-4%.

4. Hawaiian Airlines reported a 3.6% rise in traffic for October. The figure increased to 1.46 billion from 1.41 billion a year ago. On a year-over-year basis, consolidated capacity expanded 6.3% to 1.71 billion. Load factor declined to 85.6% from 87.7% recorded in October 2016 due to capacity overexpansion.


5. In a bid to strengthen its footprint in Puerto Rico, Spirit Airlines SAVE has decided to operate additional non-stop flights connecting its capital city of San Juan with key destinations in the United States. To this end, the carrier aims to operate flights to Luis Muñoz Marin International Airport from Tampa International Airport and Baltimore-Washington International Airport from Feb 14, 2019. Spirit Airlines already operates flights connecting San Juan with Fort Lauderdale and Orlando.

Price Performance
 

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

 

The table above shows that majority of the airline stocks traded in the green over the past week. However, the gains were muted in nature. Consequently, the NYSE ARCA Airline Index remained almost flat over the past five trading days. Over the course of six months, the sector tracker declined 3.6% despite impressive gains at the likes of United Continental Holdings UAL and Spirit Airlines.

What's Next in the Airline Space?

Apart from a few other traffic reports, investors will look forward to third-quarter earnings report of LATAM Airlines Group S.A. LTM that is scheduled to be released on Nov 20.

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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
 
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
 
LATAM Airlines Group S.A. (LTM) : Free Stock Analysis Report
 
AZUL SA (AZUL) : Free Stock Analysis Report
 
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