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Airline Stock Roundup: Q3 Earnings Beat at JBLU, HA & SAVE, DAL, UAL in Focus

Maharathi Basu

In the past week, JetBlue Airways JBLU, Hawaiian Airlines’ parent company Hawaiian Holdings HA and Spirit Airlines SAVE delivered better-than-expected earnings per share in the third quarter of 2019. While JetBlue’s quarterly earnings improved year over year driven by low fuel costs, the same declined at Hawaiian Holdings and Spirit.

Notably, Hawaiian Holdings reported a year-over-year decline in revenues, mainly due to pricing pressures following Southwest Airlines’ LUV entry and plans to expand in Hawaii. Spirit, results of which were impacted by high non-fuel costs, announced the signing of a Memorandum of Understanding (MOU) with Airbus in a bid to modernize its fleet. The deal allows the carrier to buy 100 new Airbus A320neo Family jets. Moreover, the airline has the option to purchase up to 50 more planes under the MOU, which includes Airbus A319, A320, and A321 models. Spirit intends to take delivery of these fuel-efficient jets through 2027.

Delta Air Lines DAL also grabbed headlines by virtue of its fleet-upgrade efforts. Further, an expansion-related update was available from the United Airlines UAL in the past week.

 (Read the last Airline Stock Roundup here).

Recap of the Past Week’s Most Important Stories

1. JetBlue Airways’ third-quarter 2019 earnings per share (excluding 4 cents from non-recurring items) came in at 59 cents per share, which outpaced the Zacks Consensus Estimate of 53 cents. Meanwhile, operating revenues of $2,086 million were in line with the Zacks Consensus Estimate. However, it compared favorably with the year-ago number. Passenger revenues, which accounted for bulk of the top line (96.1%), improved 3.3% year over year in the quarter under review. Other revenues were also up 21.6%. (Read more: JetBlue's Q3 Earnings Surpass Estimates, Increase Y/Y).

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

2. Spirit Airlines’ third-quarter 2019 earnings per share (excluding 10 cents from non-recurring items) of $1.32 surpassed the Zacks Consensus Estimate by 5 cents. Moreover, operating revenues of $992 million edged past the Zacks Consensus Estimate of $989 million. The top line also improved 9.7% year over year on the back of a 17.7% rise in flight volumes.

Total operating revenue per available seat mile (TRASM) declined 1.7% in the reported quarter owing to lower load factor (% of seats filled by passengers), unfavorable passenger yields and the Hurricane Dorian-related adversity.  Adjusted operating expenses increased 13.1% to $858.2 million, mainly due to higher expenses on salaries, wages and benefits and costs related to passenger re-accommodation. Cost per available seat miles (CASM) increased 2.4% in the reported quarter.

Average economic fuel cost per gallon in the reported quarter declined 11.9% year over year to $2.08.  However, CASM excluding operating special items and fuel increased 8.4% year over year. Spirit anticipates capacity growth of approximately 16% year over year for the fourth quarter of 2019. The company expects fourth-quarter TRASM to decline in the 4.5%- 6.5% band.

3. Hawaiian Holdings’ third-quarter 2019 earnings (excluding 2 cents from non-recurring items) of $1.72 per share outpaced the Zacks Consensus Estimate of $1.69. However, the bottom line declined 9.9% year over year. Although quarterly revenues of $755.2 million surpassed the Zacks Consensus Estimate of $748.1 million, it dipped marginally year over year.

Passenger revenues accounting for bulk (91.9%) of the top line slipped 0.4% year over year. Airline traffic, measured in revenue passenger miles, inched up 2.7% year over year to 4.67 billion (for total operations) in the quarter under review. Capacity, measured in available seat miles, contracted 0.4% to 5.33 billion. Meanwhile, operating revenue per available seat mile (RASM: a key measure of unit revenue) in the quarter slipped 0.1% year over year. Average fuel cost per gallon declined 11.9% to $1.99 in the third quarter while operating cost per ASM excluding aircraft fuel and non-recurring items increased 4.9%. Economic fuel cost per gallon declined 5.1% to $2.04. During the quarter, Hawaiian Holdings returned $25.7 million to shareholders through $5.7 million in dividends and $20 million in buybacks.

The company anticipates capacity to increase between 3% and 4.5% in the fourth quarter. RASM is projected to decline 0.5-3.5% in the period due to pressures related to average fares in the carrier’s domestic markets. Cost per ASM excluding fuel and non-recurring items is also projected to decline 0.5-3.5%. Economic fuel costs are envisioned to be $2.04 per gallon in the December quarter.

Capacity for the full year is expected to rise in the 1.9-2.4% band. Cost per ASM excluding fuel and non-recurring items is projected to increase in the 1.8-2.6% in the current year.  Additionally, economic fuel costs are estimated at $2.05 per gallon in 2019. Capital expenditures for 2019 are predicted in the $410-$430 million range.

4. Delta aims to add two leased new A330-900 jets to its fleet following a deal with aircraft leasing company Air Lease. The leased planes, which will be powered by Rolls-Royce Trent 7000 engines, are scheduled to be delivered in fourth-quarter 2020 and first-quarter 2021.

Moreover, Delta inked a deal with Airbus to expedite the delivery of three A330-900neo jets. While two jets will be added to Delta’s fleet in the fourth quarter of 2020, the other one will come in first-quarter 2021. Notably, Delta expects to take delivery of seven A330-900neo planes next year.

5. In a bid to boost connectivity between the United States and New Zealand, United Airlines along with its joint venture partner Air New Zealand announced that the only nonstop service between New Zealand and the United States (East Coast) will be operative from October 2020 onward. As part of this expansion initiative, Air New Zealand aims to operate new nonstop flights (thrice a week) between Auckland and New York/Newark.

Performance

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

The table above shows that most stocks traded in the green over the past week, leading to the NYSE ARCA Airline Index gaining 1.6%. Over the course of six months, the NYSE ARCA Airline Index has appreciated 2.1%.

What's Next in the Airline Space?

Investors will look forward to third-quarter 2019 earnings reports of the likes of SkyWest SKYW and GOL Linhas on Oct 30 and 31, respectively.

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SkyWest, Inc. (SKYW) : Free Stock Analysis Report
 
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
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