Airline Stocks Roundup: Lower-than-expected Q2 loss from SAVE, July traffic from CPA
Last week, Spirit Airlines SAVE reported a loss for the second quarter of 2022. The loss, however, was lower than the Zacks consensus estimate and also lower than the prior year’s loss. Optimism in air travel demand contributed to results.
Copa Holdings CPA reported a load factor (% of seats occupied by passengers) of 87% for July 2022, higher than the July 2019 load factor (pre-coronavirus level) of 86.6%. Alaska Airlines, the wholly owned subsidiary of Alaska Air Group ALK received encouraging news on the labor front when 5,300 of its workers, represented by the Machinists’ Union, ratified a two-year extension to their pay-linked contracts.
Summary of the latest Top Stories
1 Spirit Airlines second quarter 2022 loss (excluding 18 cents of one-time items) of 30 cents per share was lower than Zacks consensus estimate and prior year quarter loss of 34 cents each . In the second quarter of 2022, operating revenue of $1,366.6 million beat Zacks’ consensus estimate of $1,353.6 million and improved 59% year-over-year driven by improved demand for air travel, increased flight volumes and improved operating efficiencies. SAVE expects adjusted operating expenses for the third quarter to be between $1,320 million and $1,330 million. The adjusted pre-tax margin is expected between -1 and +1%. SAVE currently wears a Zacks Rank #3 (Hold).
2. Alaska Airlines customer service, cargo and ground service employees and others represented by the International Association of Machinists and Aerospace Workers have ratified a two-year extension of their contract. The approval secures salary increases and other benefits through 2026. Key features of the contract include higher base pay rates for all classifications in the 8.9-17.4% band, at effective August 10, 2022. Employees will be eligible for a further increase of 2.5% in all base pay rates for all classifications effective the same date of 2023. The base pay rate will also increase by 2 .5% for the following two years. The existing job security clause (modifiable on September 27, 2026) is extended until September 27, 2028.
3. In July, Copa Holdings’ traffic, measured in revenue passenger miles (RPM), fell 2.7% to 1.9 billion from the comparable period level in 2019. The decline was primarily due to the drop in demand for coronavirus-induced air travel from pre-pandemic levels. Due to tepid demand, capacity – measured in available seat miles (ASM) – fell 3.1% from the 2019 level to 2.19 billion. With traffic declining less than capacity contraction, load factor improved by 40 basis points (bps) to 87% in July 2022.
Copa Holdings also grabbed headlines when it reported better-than-expected second-quarter 2022 earnings per share and revenue. The story was reported in detail in the report from the previous week.
4. In line with its decarbonization efforts, United Airlines LAU would have has made a $10 million deposit for 100 electric flying taxis from electric vertical take-off and landing (eVTOL) startup Archer Aviation. This environmentally friendly move is in line with UAL’s intention to enter the air taxi business.
The following table shows the price development of the major airline players over the past week and over the past six months.
Image source: Zacks Investment Research
The chart above shows that almost all airline stocks traded in the green over the five trading days. The NYSE ARCA Airline Index rose 3% to $63.58. Over the past six months, the NYSE ARCA Airline Index has fallen 25.2%.
What’s next in airspace?
Stay tuned for the usual updates on this space.
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