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Airline Stock Roundup: LTM Files for Bankruptcy Protection, DAL, RYAAY in Focus

In the past week, Latin American carrier LATAM Airlines Group LTM filed for U.S. bankruptcy protection due to the coronavirus-induced fast-evaporating air-travel demand. Notably, the sinking air-travel demand caused many carriers to post losses in the March quarter, the latest being another Latin American carrier Azul AZUL, which it confirmed while announcing first-quarter financial numbers in the previous week.

Delta Air Lines DAL also grabbed headlines in the past week with its CEO Edward Bastian stating that he hopes to add around 200 flights in June and another 200 or 300 flights in July. Meanwhile, Ryanair Holdings RYAAY expressed its displeasure over the government-backed EUR9 billion bailout package to German carrier Deutsche Lufthansa DLAKY.

 Wrap-Up on the Past Week’s Key Headlines

1. LATAM Airlines filed for Chapter 11 bankruptcy protection in the United States as it grapples with a dramatic drop in air travel demand amid coronavirus concerns. Along with the Latin American carrier, its affiliates in Chile, Peru, Colombia, Ecuador and the United States are part of the bankruptcy filing, while those in Argentina, Brazil and Paraguay are not. Despite the restructuring, LATAM Airlines and its affiliates will continue usual passenger and cargo operations.

2. Delta expects to increase its summer capacity amid signs of improvement in domestic travel demand. To comply with social distancing norms amid coronavirus concerns, Delta, carrying a Zacks Rank #3 (Hold), has capped passenger load to only 60% of the total number of seats. Additionally, the airline is making constant efforts to sanitize aircraft in order to encourage passengers to travel.

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3. In a bid to win back passengers, United Airlines UAL launched a new cleanliness program — United CleanPlus — in collaboration with Cleveland Clinic and Clorox to combat the COVID-19 pandemic. The deal with Cleveland Clinic aims to promote United Airlines’ cleaning, safety and social distancing protocols. Initially, Clorox products will be used at the gates and terminals of United Airlines hub airports, Chicago and Denver.

4. Per a Reuters report, Ryanair challenged the impending government rescue package for Lufthansa. The European low-cost carrier fears that the huge state aid, which will become effective following approval by the European Commission (expected shortly), will distort competition and deny a level playing field to low-cost carriers like Ryanair. The package, once effective, might offer Lufthansa unfair advantage as it may “engage in below-cost selling.” 

5. Spirit Airlines presented a rosy picture at an investor presentation. Management stated that its low-cost structure has enabled it to withstand the current coronavirus-led crisis. The current average daily cash burn rate of $4 million is expected to improve in the second half of 2020. In a bid to preserve cash, the carrier reduced the current-year planned gross capital expenses by $235 million. To bolster its liquidity position, the carrier has finalized a deal with the U.S. treasury Department for payroll support of approximately $335 million ($264 million in grants which it does not have to pay back and $71 million in unsecured low-interest loan) under the CARES Act. Low fuel costs are also providing cushion to the bottom line.

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 traded in the green over the past week, resulting in the NYSE ARCA Airline Index gaining 13.5% to $50.07. Over the course of six months, the Index depreciated 54%.

What’s Next in the Airline Space?

Investors will watch out for the first-quarter 2020 earnings report of LATAM Airlines on Jun 1.

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Ryanair Holdings PLC (RYAAY): Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL): Free Stock Analysis Report
 
Deutsche Lufthansa AG (DLAKY): Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
 
LATAM Airlines Group S.A. (LTM): Free Stock Analysis Report
 
AZUL SA (AZUL): Free Stock Analysis Report
 
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