SKYW, CPA & SAVE Post Q4 Loss, AZUL & GOL in Focus

In the past week, SkyWest SKYW, Copa Holdings CPA, Spirit Airlines SAVE reported losses for fourth-quarter 2020. Results were hurt by disappointing passenger revenues as air-travel remained depressed. Notably, the likes of American Airlines AAL and Southwest Airlines LUV too suffered a similar debacle when they posted their respective fourth-quarter financial numbers as mentioned in the previous week’s write up.

Meanwhile, improvement in air-travel demand in the domestic markets aided the January traffic results of Latin American carriers like Gol Linhas GOL and Azul AZUL. Evidently, Gol Linhas operated 489 flights per day, on average, in January compared with 476 in December.

Recap of the Past Week’s Most Important Stories

1. SkyWest, currently carrying a Zacks Rank #3 (Hold), incurred a loss of 93 cents per share in the fourth quarter of 2020, wider than the Zacks Consensus Estimate of a loss of 87 cents. However, in the year-ago period, the company reported earnings of $1.43 per share. Meanwhile, quarterly revenues of $589.6 million surpassed the Zacks Consensus Estimate of $530 million but declined 20.7% year over year.

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

2. Copa Holdings posted a loss (excluding $1.97 from non-recurring items) of $2 per share in fourth-quarter 2020, wider than the Zacks Consensus Estimate of a loss of $1.90. However, in the year-ago quarter, the company reported earnings of $2.17 per share. Meanwhile, quarterly revenues of $158.6 million beat the Zacks Consensus Estimate of $153.4 million. However, the top line plunged 76.7% year over year with passenger revenues (accounted for 93% of the top line) declining 77.6%.

On a consolidated basis, traffic (measured in revenue passenger miles or RPMs) fell 75.8% and capacity (measured in available seat miles/ASMs) slumped 72.6%. As traffic decline was more than the amount of capacity contraction, load factor (% of seats filled with passengers) fell 10 percentage points to 75.3% in the reported quarter. Total operating expenses declined 61.8% year over year to $253.7 million, backed by lower passenger servicing and lower fuel cost.

Copa Holdings currently expects its capacity to reach 2.6 billion or around 40% of the capacity during the first quarter of 2019. Total revenues are expected in the range of $170-$200 million or indicate approximately 25-30% of the total revenues reported for the first quarter of 2019. Cash consumption (excluding any proceeds from asset sales and extraordinary financing activities) is expected to increase to a range of $40-$45 million per month. However, due to uncertainties stemming from the COVID-19 pandemic, the company is not providing 2021 financial guidance.

3. Despite the recent improvement, air-travel demand continues to be behind the year-ago levels. Consequently, Gol Linhas’ traffic, measured in revenue passenger kilometers, tumbled 37.2% year over year in January. With travel demand falling below the year-ago levels, the company reduced capacity significantly. In January, capacity measured in available seat kilometers contracted 36.6%.

4. At Azul, consolidated traffic in January rose 13% on a month-over-month basis. Domestic traffic was up 14% while international traffic slid 3% on a month-over-month basis. Consolidated capacity increased 14.8%. Domestic capacity climbed 16.3% while international capacity fell 4.4% from the December reading.

5. Spirit Airlines suffered a loss of $1.61 per share for the fourth quarter, wider than the Zacks Consensus Estimate of a loss of $1.44. However, in the year-ago quarter, the company delivered earnings of $1.24. Additionally, operating revenues of $498.5 million fell short of the Zacks Consensus Estimate of $521.8 million. The top line, moreover, deteriorated 48.6% year over year due to the coronavirus-led air-travel demand disaster. Passenger revenues, which contributed 97.9% to the top line, plummeted 48.7% year over year. Additionally, revenues from other sources tanked 44.2%. Load factor declined 13.3 percentage points to 71.5% as traffic contraction (37.1%) was more than the capacity dip (25%).

Adjusted operating expenses decreased 21.5% to $659.4 million, mainly on reduced flight volume and lower fuel costs. Average fuel cost per gallon in the reported quarter fell 37.1% year over year to $1.32. Fuel gallons consumed decreased 32.9%. Nonetheless, adjusted cost per available seat miles (CASM) inched up 4.3% in the reported quarter.

Moreover, CASM excluding operating special items and fuel (non-fuel unit costs), escalated 25.2% in the reported quarter due to reduced capacity. Daily cash burn in the quarter was $1.8 million, on average. Spirit ended the year with unrestricted cash, cash equivalents and short-term investments worth $1.9 billion. Capital expenditures for 2020 were $537 million. The carrier expects first-quarter 2021 capacity to shrink 17% from the levels achieved in first-quarter 2019. Fuel cost per gallon and effective tax rate in the March quarter are anticipated to be $1.75 and 21%, respectively. Adjusted EBITDA margin is projected between -45% and -55%.

Spirit Airlines, which exited 2020 with 157 jets (31 A319 CEO, 64 A320 CEO, 32 A320 NEO and 30 A321 CEO) expects its fleet size to increase to 173 (31 A319 CEO, 64 A320 CEO, 48 A320 NEO and 30 A321 CEO) by 2021 end. The same is likely to expand further to 190 by 2022 end.

Price Performance

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

The table above shows that majority of the airline stocks have traded in the green over the past week. Evidently, the NYSE ARCA Airline Index has gained almost 9% over the past week to $92.12. Over the course of six months, the sector tracker has surged 63%.

What’s Next in the Airline Space?

Investors will look forward to the update on a further financial aid for airlines.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report

Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report

American Airlines Group Inc. (AAL) : Free Stock Analysis Report

SkyWest, Inc. (SKYW) : Free Stock Analysis Report

Copa Holdings, S.A. (CPA) : Free Stock Analysis Report

AZUL SA (AZUL) : Free Stock Analysis Report

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