Airline Stock Roundup: Earnings Beat At Virgin America, SkyWest; Delta, Alaska Air Traffic Data In Focus

The past week saw Virgin America (NASDAQ:VA) and SkyWest (NASDAQ:SKYW) reporting strong first-quarter 2016 results, thanks to the dip in fuel costs. On the other hand, Allegiant Travel Company’s (NASDAQ:ALGT) in-line earnings and revenue miss was quite a disappointment.

On the non-earnings front, Delta Air Lines (NYSE:DAL) and Alaska Air Group (NYSE:ALK) reported healthy traffic data for the month of April. Load factor (% of seats filled by passengers) increased for both the carriers as traffic growth outpaced capacity expansion in the month.

On the price front, the NYSE ARCA Airline index declined 2.6% to $88.43 over the past five trading days.

Read the last Airline Stock Roundup for Apr 27, 2016.

Recap of the Past Week’s Most Important Stories

1. Low-cost carrier Virgin America's first-quarter earnings (excluding special items) of 41 cents per share beat the Zacks Consensus Estimate of 36 cents. Results were aided by low fuel costs. Operating revenues came in at $364 million, surpassing the Zacks Consensus Estimate of $362 million. Revenues also improved 11.5% from the year-ago figure.

Meanwhile, capacity increased 15.8% on a 15.9% rise in traffic during the quarter. Load factor was flat on a year-over-year basis at 80.1%. Passenger revenue per available seat mile (PRASM: a measure of unit revenue) declined 3.8% to 9.88 cents in the reported quarter. Total RASM decreased 3.7% in the first quarter of 2016 and yield per passenger mile declined 3.7%.

2. St. George, Utah-based SkyWest, Inc.’s first-quarter earnings of 52 cents per share was way ahead of the Zacks Consensus Estimate of 25 cents. Earnings also improved approximately 68% from the year-ago figure. Quarterly revenues of $762 million comfortably beat the Zacks Consensus Estimate of $738 million and expanded marginally on a year-over-year basis. SkyWest’s efforts to modernize its fleet by adding new aircraft and removing unprofitable/less profitable ones drove the upbeat results.

3. Alaska Air Group, the parent company of Alaska Airlines and Horizon Air, posted a significant rise in air traffic for Apr 2016. Revenue passenger miles (RPMs) – a measure of air traffic – improved 11.1% on a 10.4% capacity expansion. Load factor increased to 84.1% from 83.6% in Apr 2015 as capacity expansion was outpaced by the increase in traffic.

4. Delta Air Lines revealed a 2.7% increase in RPMs for April while capacity improved 2.5%. Load factor increased to 83.3% from 83.2% in Apr 2015 as capacity expansion lagged the increase in traffic. However, Delta witnessed a 4% drop in PRASM in the month, mainly due to foreign exchange woes.

On a separate note, good news flowed in for Delta after the Mexican Federal Economic Competition Commission approved (with conditions) the carrier’s proposed $1.5 billion joint venture with Grupo Aeromexico. The carriers aim to strengthen their partnership with this JV.

5. Allegiant Travel Company’s first-quarter 2016 earnings per share of $4.29 were line with the Zacks Consensus Estimate. Quarterly revenues increased 5.9% year over year to $348.6 million, narrowly missing the Zacks Consensus Estimate. Air traffic rose 15% year over year on an 18.8% rise in capacity, while load factor stood at 84% compared with 86.8% recorded in the year-ago quarter. Fuel expense per ASM declined 35.1% in the reported quarter, thus aiding the bottom line. Fuel price (average) declined 33.2% to $1.29 per gallon in the reported quarter.

For the second quarter of 2016, the company expects cost per available seat mile (CASM), excluding fuel, to grow in the range of 4% to 6%. TRASM in the second quarter is likely to decline in the band of 10% to 8%.

Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months.

The table shows that almost all airline stocks traded in the red over the past week with shares of low-cost carrier Spirit Airlines depreciating the most (9.16%). Virgin America was the sole gainer over the period on the back of its impressive first-quarter results.

Over the past six months as well, most airline stocks traded in the red leading to the NYSE ARCA Airline index declining 4.49%%. Shares of Virgin America appreciated the most (49.41%) during the period while American Airlines (NASDAQ:AAL) emerged as the biggest laggard (24.22%).

What's Next in the Airline Space?

Latin American carrier Copa Holdings (NYSE:CPA) is slated to release its first-quarter 2016 results on May 5. Moreover, multiple traffic updates for the month of April are expected over the next few days.