For Immediate Release
Chicago, IL – June 18, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: American Airlines AAL, Delta Air Lines DAL, Southwest Airlines LUV, United Airlines UAL and Ryanair Holdings RYAAY.
Here are highlights from Wednesday’s Analyst Blog:
Airline Industry Soars 50%+ in a Month: More Room to Rally?
After being on the receiving end of the pandemic crisis that bottled-up air-travel demand, stocks in the airline space finally have something to cheer about. Recently, many aviation stocks issued bullish updates on the back of an improved air-travel demand scenario. The buoyancy is evident from the fact that the Zacks Airline industry has gained 50.8% in the past month compared with the S&P 500 Index’s mere 3.8% rise.
Reasons for This Resurgence
Reopening of businesses in countries around the globe and easing of travel bans bode well for the airline stocks, which are witnessing a surge in new bookings. Evidently, American Airlines saw 60% growth in July bookings on a year-over-year basis.
Management at American Airlines stated that it intends to operate 55% of its scheduled domestic flights in July 2020 compared with the capacity recorded in July 2019. Evidently, the company flew nearly 110,000 passengers per day, on average, in the last week of May, up 71% from the April reading. Moreover, American Airlines aims to operate nearly 20% of its internal flights scheduled for July compared with the last-year level.
Also, owing to the recent uptick in air-travel demand alongside cost-cutting initiatives, the carrier projects its cash-burn rate to fall to nearly $40 million per day in June from $100 million in April. Further, this Zacks Rank #3 (Hold) company hopes to reduce its cash-burn rate to zero by Dec 31, 2020. Delta Air Lines too expects to lower its average daily cash outflow to zero by 2020 end. Moreover, this Atlanta, GA-based carrier predicts the demand-recovery landscape to be healthier on the domestic front than in the international markets. As a result, it added 100 domestic flights in June.
Moreover, the company plans to continue extending the flight fleet in the third quarter. Further, Southwest Airlines boosted its June schedule by 27% from the May reading. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Additionally, the cost-controlling initiatives of airlines are supporting bottom-line growth in the current environment of depressed revenues. Evidently, owing to its cost-saving measures, United Airlines expects second-quarter operating expenses to decrease 53% year over year.
Another factor working in favor of the airlines in this otherwise economic gloom is their focus on operating cargo-only flights. Understandably, the cargo business unit of Latin American carrier Azul registered a 36% increase in first-quarter 2020 revenues. Backed by its concentration on cargo-only flights to offset passenger revenue weakness, United Airlines expects the same to surge more than 30% year over year in the June quarter.
The relaxation of restrictions on flights connecting the United States with China is another positive. Notably, the likes of Delta and United Airlines aim to resume operations on the U.S.-China routes shortly.
The Road Ahead
Although the recent rally in airline stocks owing to the above-mentioned tailwinds looks impressive, the million-dollar question is whether this uptick is sustainable. Fears over a second wave of coronavirus are a major headwind. In fact, European low-cost carrier Ryanair Holdings’ CEO Michael O’Leary recently stated that even though he expects the carrier to be profitable in fiscal 2022 (ending Mar 31, 2022), “Everything will depend on how people will fly between September and March and that there is no second-wave outbreak”.
However, one thing is certain that demand will not rebound to pre-coronavirus levels anytime soon. Per the International Air Transport Association (IATA), the aviation industry is estimated to suffer loses to the tune of $84.3 billion in the current year due to the coronavirus woes.
However, the forecast seems brighter for 2021 with total loss for the industry likely to be narrower at $15.8 billion.
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Click to get this free report Southwest Airlines Co. (LUV) : Free Stock Analysis Report Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report United Airlines Holdings Inc (UAL) : Free Stock Analysis Report American Airlines Group Inc. (AAL) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research