The past week saw California-based low-cost carrier Virgin America VA churning out impressive financial numbers for the second quarter of 2015, with higher-than-estimated earnings as well as revenues. Las Vegas-based Allegiant Travel Company ALGT, the parent company of Allegiant Air, also delivered earnings that exceeded expectations in the second quarter. Revenues, meanwhile, were in line with the Zacks Consensus Estimate.
On the non-earnings front, United Continental Holdings UAL, the parent company of United Airlines, featured in the headlines, albeit for the wrong reasons. According to media reports, China-backed cyber criminals hacked the airline’s computer systems which resulted in loss of sensitive data. Delta Air Lines DAL was also in the news for its announcement of the ban on transportation of animal hunting trophies as cargo on its planes. Apart from this environment-friendly move, the carrier also revealed traffic numbers for July 2015.
On the price front, the NYSE ARCA Airline index gained 4.1% over the past week on the back of weak oil prices.
(Read the last Airline Stock Roundup for July 29, 2015).
Recap of the Past Week’s Most Important Stories
1. Virgin America’s second-quarter 2015 adjusted earnings of $1.46 per share beat the Zacks Consensus Estimate by 18 cents. Results were aided by low fuel costs. Operating revenues came in at $400.9 million, surpassing the Zacks Consensus Estimate of $393 million (read more: Virgin America Tops Q2 Earnings on Low Fuel Costs, Stock Up).
2. According to a report in Bloomberg, United Continental Holdings has fallen prey to China-backed Internet hackers. The report stated that the attack on its software systems was detected by the Chicago-based carrier in May/early June (read more: United Continental's Software Hit by China-backed Hackers).
The carrier also saw a change at its helm with Gerald Laderman being named as the acting chief financial officer replacing John Rainey. Rainey has moved to PayPal Holdings in a similar capacity.
3. Close on the heels of the furor surrounding the killing of the lion Cecil at Zimbabwe’s Hwange National Park, Delta Air Lines issued a statement to ban the transportation of hunted trophies of lions, leopards, elephants, rhinoceros and buffalos as cargo on its planes (read more: Delta to Ban Trophy Animal Shipments on Flights).
Delta stated, while reporting traffic figures for July, that its passenger unit revenue (PRASM: a measure of unit revenue) for the month, on a consolidated basis, declined 3% year over year due to foreign exchange pressure. A stronger dollar negatively impacted international business.
Moreover, lower surcharges in international markets also hurt PRASM apart from yield pressure in some domestic markets. Airline traffic, measured in revenue passenger miles, went up 4.7% year over year to 20.91 billion on a consolidated basis.
Consolidated capacity or available seat miles (ASMs) improved 4.2% to 23.77 billion. Load factor (% of seats filled with passengers) on a consolidated basis was up 40 basis points (bps) to 87.9%. The company registered a completion factor of 99.9%, with 84.2% of its flights on schedule.
4. Alaska Air Group ALK, the parent company of Alaska Airlines, reported healthy traffic numbers for July on the back of strong demand. The carrier saw its July air traffic move up 6.4% year over year on a 6.9% rise in capacity. Load factor fell 40 bps to 88.1%, courtesy a greater rise in capacity compared with air traffic.
5. Allegiant Travel Company’s second-quarter 2015 earnings per share of $3.18 surpassed the Zacks Consensus Estimate of $3.13. Quarterly revenues increased 10.9% year over year to $322 million, in line with the Zacks Consensus Estimate. Airline traffic moved up 13.6% year over year on a 17.5% rise in capacity, while load factor stood at 85.7% against 88.7% recorded in the year-ago quarter. Fuel expense per ASM declined 35.3% in the reported quarter, thus aiding the bottom line.
For 2015, the company expects cost per available seat mile (CASM), excluding fuel, to be down to the range of 13% to 11%. The metric is projected to decline in the range of 10% to 8% in the third quarter of 2015. TRASM in the third quarter is projected to decline in the band of 9% to 7%.
Performance
The following table shows the price movement of the major airline players over the past week and during the last 6 months.
|
Company |
Past Week |
Last 6 months |
|
HA |
3.80% |
19.79% |
|
UAL |
1.11% |
-15.30% |
|
GOL |
-5.26% |
-61.34% |
|
DAL |
2.43% |
0.46% |
|
JBLU |
4.08% |
41.29% |
|
AAL |
3.34% |
-12.44% |
|
SAVE |
-2.38% |
-23.06% |
|
LUV |
4.52% |
-14.71% |
|
CPA |
2.42% |
-34.47% |
|
ALK |
4.49% |
16.39% |
As seen in the chart above, most of the key airline stocks traded in the green over the past week. Meanwhile, majority of the stocks have shed value over the last six months. Shares of Latin-American carrier GOL Linhas GOL depreciated the most (61.34%) during the six-month period.
What's Next in the Airline Biz?
With the earnings season nearly over, we expect traffic updates from carriers like Southwest Airlines LUV, in the coming days. Focus will also remain on updates on the probes ongoing against major U.S. carriers.
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