Airline Stock Roundup: SAVE's In-Line Earnings, SKYW's Dividend Hike & More

In the past week, ultra-low cost carrier Spirit Airlines (NYSE:SAVE) reported mixed fourth-quarter 2018 results. Moreover, the carrier unveiled a below par guidance for first-quarter 2019 unit revenue growth. The twin developments resulted in the stock losing value following its earnings release.

Meanwhile, SkyWest’s (NASDAQ:SKYW) board of directors approved a 20% hike in its quarterly dividend to 12 cents per share (annualized 48 cents a share). Also, SkyWest was in the news when it unveiled its January traffic numbers.

Azul (NYSE:AZUL) and Allegiant Travel Company (NASDAQ:ALGT) too revealed their respective traffic numbers. While load factor (% of seats filled by passengers) decreased at Allegiant, the measure increased at the Latin-American carrier. Azul also grabbed headlines by virtue of its fleet modernization efforts.

(Read the last Airline Stock Roundup for Feb 05, 2019)

Recap of the Past Week’s Most Important Stories

1. Spirit Airlines’ fourth-quarter 2018 earnings (excluding 4 cents from non-recurring items) of $1.38 per share were in line with the Zacks Consensus Estimate. However, the bottom line improved significantly year over year. Revenues totaled $862.8 million, which outpaced the Zacks Consensus Estimate of $852.2 million and improved 29.4% year over year. The upside can be attributed to 27% and 7.6% rise in non-ticket revenues and operating yields, respectively.

For the first quarter of 2019, the company expects total revenue per available seat mile (TRASM) to increase approximately 5% year over year. This is certainly a conservative outlook, given the airline’s fourth-quarter TRASM improvement of 11.4% on a year-over-year basis. (Read more: Spirit Q4 Earnings Meet Estimates, Q1 TRASM View Weak).

Spirit Airlines carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

.2. SkyWest announced that its board of directors has approved a new share repurchase program worth $250 million. Notably, this replaces the $100 million buyback program, which was cleared in February 2017. Also, the regional carrier raised its quarterly dividend by 20%. (Read more: SkyWest Rewards Investors With Dividend Hike & New Buyback).

In a separate development, SkyWest reported a 5.6% (6,187) year-over-year increase in block hours (a measure of aircraft utilization) for January. SkyWest’s dual class fleet (E175, CRJ900 and CRJ700) accounted for 65.7% of the carrier’s total block-hour production compared with approximately 58.8% a year ago. (Read more: SkyWest Reports Increase in January Block Hours).

3. In a bid to upgrade its fleet, Azul intends to add 21 next-generation aircraft in its fleet this year, which indicates an increase of eight such aircraft from the previous announcement. Moreover, the carrier aims to retire 15 Embraer E195 E1s from its fleet. According to the previous plan, the company announced the retirement of eight such planes.(Read more: Azul Ramps up Fleet Renewal Process to Boost Efficiency).

Additionally, consolidated traffic (measured in revenue passenger kilometers or RPKs) in January improved 13.5% year over year to 2.6 billion at Azul. The upside was driven by an 11.2% rise in international RPKs and 14.3% increase in domestic RPKs. On a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) expanded 15.9% to 3.1 billion owing to 16.7% growth in international capacity and 15.7% rise in domestic capacity. (Read more: Azul Posts a Rise in January Traffic, Load Factor Down).

4. At Allegiant, traffic for the total system including scheduled service and fixed fee contract — measured in revenue passenger miles (RPMs) — dipped 1.5% on a year-over-year basis to 864.22 million. System capacity, calculated in available seat miles (ASMs), also slid 1.6% to 1.08 billion in January. As capacity declined more than the fall in traffic, load factor inched up 10 basis points year over year to 80%.

Allegiant’s passenger count slipped 0.8% in January. Its system-wide average fuel cost per gallon was approximately $2.01 in the month, lower than $2.07 in December 2018.(Read more: Allegiant's Load Factor Up, Traffic Down in January).

5. At Hawaiian Airlines, the wholly-owned subsidiary of Hawaiian Holdings (HA), revenue passenger miles increased 4.8% to 1.43 billion in January. Available seat miles also climbed 4.6% to 1.7 billion in the month. Load factor inched up 20 basis points to 84.3% as traffic growth outweighed capacity expansion. However, the number of passengers transported dropped 1.5% year over year to 958,548 in the same period. Read more: Hawaiian Airlines' Traffic & Load Factor Rise in January).

Performance

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

The table above shows that most airline stocks traded in the green in the past week leading to the NYSE ARCA Airline Index gaining 0.5%. Over the last six months, the sector tracker appreciated 1.5% driven by impressive gains at GOL Linhas Aéreas Inteligentes (NYSE:GOL) and Spirit Airlines during the period.

What's Next in the Airline Space?

Investors will look forward to Copa Holdings’ (NYSE:CPA) fourth-quarter earnings report on Feb 13.

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