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Airline Stock Roundup: RYAAY's Q2 Earnings Miss, GOL's October Traffic

In the past week, Ryanair Holdings RYAAY reported lower-than-expected earnings per sharefor second-quarter fiscal 2023 due to high costs. Gol Linhas GOL posted a 40.9% year-over-year increase in consolidated traffic, reflecting the uptick in air-travel demand. Hurricane Nicole was the latest weather-related disruption to hurt airline operations. An expansion-related update was also available at Frontier Airlines, the wholly-owned subsidiary of Frontier Group ULCC, in the past week.

Recap of the Latest Top Stories

1, Ryanair’s second-quarter fiscal 2023 (ended Sep 30, 2022), earnings of $5.32 per share (excluding 55 cents from non-recurring items) missed the Zacks Consensus Estimate of $5.43. Revenues of $4,046.3 million beat the Zacks Consensus Estimate of $4,023.8. Revenues surged 92.3% year over year driven by upbeat passenger volumes.

On the back of a buoyant traffic scenario, RYAAY’s profit after tax was €1371 million in first-half fiscal 2023 against a net loss of €48 million incurred a year ago. In the same time period, operating costs surged 126% to €4.98 billion, due to a 205% increase in fuel expenses to €1 billion.

Average fares in the first half of fiscal 2023 were up 7% from the corresponding pre-COVID level. The same was up 14% in second-quarter fiscal 2023. Net debt at RYAAY declined to €0.5 billion at the end of the fiscal second quarter from €1.45 billion at the end of the fourth quarter of fiscal 2022.

In first-half fiscal 2023, RYAAY’s revenues surged 207% year over year to €2.15 billion on the back of buoyant traffic. Scheduled revenues in the same period increased 250% to €4.42 billion.

The number of passengers who flew on RYAAY planes were 95.1 million in the first half, up 143% from the same period’s level in the last fiscal year. The traffic was 11% more than the pre-COVID levels. Load factor in first-half fiscal 2023 was 94% compared with 39% in the previous fiscal year’s comparable period.

Ryanair upped its traffic view for fiscal 2023 to 168 million from 165 million. The new guidance indicates a 13% growth from the pre-COVID traffic numbers. Management expects profit after tax in fiscal 2023 in a range of €1 billion to €1.20 billion. The guidance is dependent on RYAAY not experiencing any adverse events this winter. In fact, management has warned that recovery for the remainder of fiscal 2023 may impacted by new Covid variants or adverse geopolitical events.

RYAAY was also in the news recently, when it reported upbeat traffic results for October. The story was reported in detail in the last week’s write-up.

2. In October, Gol Linhas’ consolidated load factor (% of seats filled by passengers) declined 2.9 percentage points to 81.4% with traffic growth (40.9%) lagging the capacity expansion of 46% year over year. The upbeat traffic in its domestic markets is leading to a rosy scenario on a consolidated basis. In October, domestic traffic and capacity improved 30.2% and 26%, respectively. On the domestic front, 26% more passengers boarded GOL’s flights in October 2022. Domestic load factor was 81.6%. The volume of departures and seats on the domestic front increased 30.9% and 31.1%, respectively. The stock currently carries a Zacks Rank #3 (Hold).

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

.3. To expand its network, Frontier Airlines reportedly announced new routes serving Phoenix and Dallas-Fort Worth. Last Friday, Frontier launched its base at Phoenix. Following the launch, the carrier is operating daily flights connecting Phoenix with Philadelphia, Fort Lauderdale, Detroit and Orange County, California. Frontier will operate flights to Cincinnati four times a week.ULCC also aims to expand its presence in Dallas-Fort Worth this spring.

4. With Nicole strengthening from a tropical storm to a hurricane, American Airlines AAL has decided to waive change fees for flights connected to 20 airports in Florida, Georgia, the Bahamas and Providenciales in the Turks and Caicos Islands. Due to hurricane Nicole, multiple flights connecting the Charlotte Douglas international airport and the airports mainly in Florida and Georgia were cancelled. This is causing untold harassment to passengers and deals a blow to airlines, already suffering labor woes.

Performance

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

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The table above shows that even though most airline stocks have traded in the red over the five trading days, the losses were muted in nature. As a result, the NYSE ARCA Airline Index has increased, albeit marginally, to $58.79 over the past five trading days. Over the past six months, the NYSE ARCA Airline Index has plummeted 20%.

What's Next in the Airline Space?

Investors will keenly await the third-quarter 2022 earnings report of the Latin American carrier Copa Holdings CPA, scheduled to be out on Nov 16.

We expect CPA’s performance to have been aided by the improving air-travel demand in Latin America. However, high fuel costs are likely to have impeded the bottom-line performance in the to-be-reported quarter.


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Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
Frontier Group Holdings, Inc. (ULCC) : Free Stock Analysis Report
 
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