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Airline Stock Roundup: DAL & UAL Report Loss for Q1, ALK & JBLU in Focus

Last week, Delta Air Lines DAL kicked off the first-quarter 2021 earnings season for the airline stocks. The carrier incurred a loss for the fifth successive quarter as the coronavirus-led weak air-travel demand induced a steep 70% fall in passenger revenues from first-quarter 2019 (pre-coronavirus) levels.

Similarly, United Airlines UAL incurred a loss for the fifth consecutive quarter due to coronavirus-induced lacklustre passenger revenues, which sank 67.2% year over year. Meanwhile, Alaska Air Group ALK gave an improved view for first-quarter 2021 load factor (% of seats filled by passengers) as air-travel demand gradually picks up in the United States with more and more Americans getting vaccinated everyday.

Recap of the Past Week’s Most Important Stories

1. Delta, currently carrying a Zacks Rank #3 (Hold), incurred a loss (excluding $1.70 from non-recurring items) of $3.55 per share in first-quarter 2021, wider than the Zacks Consensus Estimate of $3.08 as well as the first-quarter 2020 loss of 51 cents. Despite the passenger revenue weakness, total revenues of $4,150 million topped the Zacks Consensus Estimate of $3,821.3 million.

Apart from the revenue beat, another bright spot on the earnings report in this coronavirus-ravaged scenario was that average daily cash burn (which was $11 million) in the March quarter turned positive last month. Notably, cash generation was $4 million per day in March. Per Delta’s CEO Ed Bastian, “If recovery trends hold, we expect positive cash generation for the June quarter and see a path to return to profitability in the September quarter as the demand recovery progresses."

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. United Airlines incurred a loss (excluding $3.21 from non-recurring items) of $7.50 per share in the first quarter of 2021, wider than the Zacks Consensus Estimate of a loss of $6.97. Operating revenues of $3,221 million also fell short of the Zacks Consensus Estimate of $3,253.1 million. The top line further plunged 59.6% year over year due to the passenger revenue softness.

United Airlines anticipates second-quarter 2021 total revenue per available seat miles to decline approximately 20% compared with the second quarter of 2019. Additionally, capacity is expected to decrease around 45% from the second-quarter 2019 levels.

3. Copa Holdings’ CPA traffic for March, measured in revenue passenger miles (RPMs), declined 42.5% year over year to 577 million. To tackle this depressed demand scenario, the carrier is trimming capacity. Measured in available seat miles, capacity already plunged 43.4% to 773 million from the March 2020 levels. For first-quarter 2021 (detailed results coming out on May 5), Copa Holdings expects its capacity to reach 2.6 billion or around 40% of the capacity in first-quarter 2019.

Notably, another Latin American airline Azul AZUL too reported disappointing March traffic numbers as reported in the previous week’s writeup.

4. Alaska Air anticipates load factor for the first quarter to be 52%. This expectation is better than the 45-50% band projected earlier. Total revenues for first-quarter 2021 are predicted to decline 57.5% from the first-quarter 2019 levels. Capacity is estimated to contract 33% in first-quarter 2021 from the first-quarter 2019 levels. Non-fuel unit costs are expected to increase 21% from the earlier expectation of a rise of roughly 23%.

5. JetBlue Airways JBLU started operating flights to its newest international destination Guatemala City, thereby strengthening its position in Latin America & the Caribbean.  Notably, JetBlue is the only carrier to offer daily flights between New York City and Guatemala City. With this addition, JetBlue currently operates in 25 countries across the globe.

Price Performance

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

The table above shows that all airline stocks have traded in the red over the past week, mainly due to the weaker-than-expected projection of United Airlines. Consequently, the NYSE ARCA Airline Index has declined 6.6% over the past week to $98.86. Over the course of six months, the sector tracker has surged 62.7%.

What's Next in the Airline Space?

Investors will look forward to the first-quarter 2021 earnings reports of Southwest Airlines LUV, American Airlines AAL and Alaska Air, scheduled to be released on Apr 22.

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Southwest Airlines Co. (LUV): Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU): 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
 
Copa Holdings, S.A. (CPA): Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK): Free Stock Analysis Report
 
AZUL SA (AZUL): Free Stock Analysis Report
 
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