LATAM Airlines Group S.A. (NYSE:LTM) posted mixed traffic numbers for October 2018. In spite of traffic increasing substantially on the back of strong demand for air travel, load factor declined as traffic growth was outweighed by capacity expansion.
Consolidated traffic (measured in revenue passenger miles or RPMs) came in at 10.2 billion, up 1.5% from the year-ago figure. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) rose 7% to 12.4 billion.
However, consolidated load factor (percentage of seats filled by passengers) contracted 4.4 percentage points (pp) to 82.5%. Additionally, passenger count inched up 0.8% to 6,068,000.
At the end of the first 10 months of 2018, LATAM Airlines generated RPMs of 98.4 billion (up 2.4% year over year) and ASMs of 118.4 billion (up 4.7% year over year). Load factor registered a fall of 1.9 pp year over year to 83.1%.
We believe that apart from the traffic report, investors interested in LATAM Airlines are keenly awaiting the release of third-quarter 2018 earnings results, scheduled on Nov 20. We expect escalating oil prices to dent bottom-line growth at LATAM Airlines in the to-be-reported quarter. It is a well-documented fact that the health of airline stocks is inversely related to oil prices. This is because fuel costs are one of the most significant expenses for carriers. Naturally, rise in oil prices leads to increase in operating expenses, which limits bottom-line growth.
Zacks Rank & Stocks to Consider
LATAM Airlines carries a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader Transportation sector are Spirit Airlines, Inc. (NYSE:SAVE) , Matson, Inc. (NYSE:MATX) and Norfolk Southern Corporation (NYSE:NSC) . While Matson and Norfolk Southern carry a Zacks Rank #2 (Buy), Spirit Airlines sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Spirit Airlines, Matson and Norfolk Southern have gained 48%, 18% and 10.7% in the past six months, respectively.
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Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
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LATAM Airlines Group S.A. (LTM): Free Stock Analysis Report
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