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Airline Stock Roundup: GOL’s Bullish Investor Update, ALK’s Power Outage & More


In the past week, Gol Linhas Aereas Inteligentes GOL issued an upbeat view on its fourth-quarter 2018 financial results, scheduled to be released on Feb 28. This Latin-American carrier also reported impressive December traffic numbers with increase in load factor (% of seats filled with passengers) as traffic growth outweighed capacity expansion.

Load factor for December, however, declined at another Latin-American carrier — Azul AZUL. U.S.-based carrier SkyWest SKYW also disappointed with respect to this key metric. Alaska Air Group’s ALK subsidiary — Alaska Airlines — too grabbed headlines as its operations were disrupted on Jan 6 due to a power outage in the Seattle area. Currently, the problem has been resolved. Meanwhile, United Continental Holdings’ UAL subsidiary — United Airlines — announced that its first Boeing 787-10 Dreamliner has commenced operations.

On the price front, the NYSE ARCA Airline Index improved 3.1% in the past week.

(Read the last Airline Stock Roundup here)

Recap of the Past Week’s Most Important Stories

1. Gol Linhas expects fourth-quarter operating margin (EBIT margin) in the range of 19.5-20%, reflecting an improvement of 6 percentage points (pp) year over year. Also, EBITDA margin is expected to be 25-25.5% in the October-December period. Meanwhile, the carrier’s consistent focus on capacity discipline and revenue management strategies is yielding results. As a result, the airline predicts passenger unit revenues (PRASK) to rise approximately 6-6.5% year over year. Also, total unit revenues (RASK) are anticipated to increase 5.5-6%. (Read more: Gol Linhas' Q4 Unit Revenue View Upbeat on Capacity Discipline).

Consolidated December traffic and capacity at GOL Linhas also increased 5.9% and 3.2%, respectively. The carrier posted a 5.8% rise in passenger count (read more: GOL Linhas Posts Increase in December Traffic and Load Factor).

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. Alaska Airlines has resumed operations after an hour-long power outage grounded its flights from 4.20 a.m. Due to the disruption, the carrier had to cancel five flights, while 27 were delayed. Needless to say, the delays/cancellation of flights caused unwarranted harassments to its passengers.

3. At SkyWest, block hours (a measure of aircraft utilization) declined 2.7% to 147,300. The regional carrier, focused on streamlining operations, stated that the fall in the metric was in sync with fleet transition plans. Notably, SkyWest’s dual class aircraft (E175, CRJ900 and CRJ700) accounted for approximately 55.4% of the carrier’s total block-hour production in December compared with approximately 52.7% a year ago. In terms of airlines, SkyWest and Express Jet Airlines contributed a respective 82.6% and 17.4% of the carrier’s total block-hour production last month (read more: SkyWest December Block Hours & Load Factor Decline).

4. At Azul, consolidated traffic (measured in revenue passenger kilometers or RPKs) improved 13.4% year over year to 2.3 billion owing to a 16.2% rise in the metric internationally and 12.4% growth domestically. On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) also expanded 13.5% to 2.8 billion on the back of a 15.4% expansion in international capacity and a 12.9% rise in the metric domestically (read more: Azul Posts Increase in December Traffic, Load Factor Down).

5. United Airlines, which will unveil its fourth-quarter 2018 results on Jan 15, said that it will incur a special non-cash impairment charge to the tune of $206 million ($160 million net of taxes) due to high costs pertaining to its Hong Kong routes. The carrier also stated that revenues have not increased enough to match the escalated expenses, causing it to record the additional charges.

Furthermore, the carrier took a significant step toward fulfilling its objective of cutting down on fuel emissions by 50% through 2050 when it announced that its first Boeing 787-10 Dreamliner has taken to the skies. The 787-10 model apart, the carrier operates two other Dreamliner versions — 787-8 and 787-9. The newest Dreamliner in its fleet is equipped with all modern amenities to enhance the flying experience of passengers, including the carrier’s Polaris business class seats. Currently, it is operating scheduled flights between Los Angeles International Airport and Newark Liberty International Airport.

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 stocks exhibited a mixed trend with respect to price over the past week.

Over the course of six months, the sector tracker declined 7.5% despite impressive gains at the likes of GOL Linhas and Spirit Airlines.

What's Next in the Airline Space?

We expect December traffic reports from the likes of JetBlue Airways JBLU in the coming days. Delta Air Lines DAL is scheduled to release fourth-quarter earnings report on Jan 15.


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