Airlines’ Relative Valuations after 4Q16 Earnings: What Is Priced In?
Alaska Air Group (ALK) currently has the highest forward EV-to-EBITDA multiple of 6.6x.
Among the seven major carriers, most analysts seem to favor Delta Air Lines (DAL), which has a “buy” rating from 87.5% of the analysts.
In 4Q16, Delta Air Lines (DAL) had the highest FCF yield of 9.9%. JetBlue Airways (JBLU) had the second-highest FCF yield of 8.7%.
Delta Air Lines (DAL), Southwest Airlines (LUV), United Continental (UAL), and American Airlines (AAL) renegotiated contracts with their pilots and other contract workers toward the end of 3Q16.
In 4Q16, regional carrier Spirit Airlines (SAVE) had a leverage ratio of 0.96x, JetBlue Airways (JBLU) had a leverage ratio of 0.83x, and Alaska Air Group (ALK) had a leverage ratio of 0.36x.
Southwest Airlines (LUV) has one of the highest fuel costs among its peers, mostly due to its hedging-related losses.
On an EBITDA level, Alaska Air Group (ALK) enjoyed the highest margin of 31% in 2016.
In 4Q16, Delta Air Lines’s utilization fell 0.1% to 85.1%, and United Continental’s utilization fell 0.4% to 82.4%.
In 4Q16, Southwest Airlines (LUV) recorded the largest yield decline among its peers. In 4Q16, LUV’s yields fell 4% year-over-year to 14.7 cents.
In 4Q16, Spirit Airlines (SAVE) saw the highest capacity growth of 15.4% year-over-year. Alaska Air Group (ALK) saw the second-highest capacity growth of 10.3%.
In 4Q16, Spirit Airlines’s (SAVE) traffic grew 13.4% year-over-year, which is 2% lower than its year-over-year capacity growth of 15.4%.
Among the regional players, Spirit Airlines (SAVE) stole the show with industry-leading revenue growth of 11.3% in 4Q16.
Most airline stocks kept climbing after their 4Q16 results were released, thanks to strong earnings and reinforcement by Warren Buffett. In this series, we’ll explore the key highlights of the major airlines’ 4Q16 earnings.
Most US airline stocks have gained since the ban on most electronic devices was announced on March 22, 2017.
Storing all electronics devices in the cargo hold creates dangers of its own.
No US airline currently offers direct, non-stop flights from the airports affected by the recent electronics ban to the US.
Most of the airlines in the Middle East affected by the latest ban on electronics gain a significant share of their revenues from business class travelers.
According to the UK and US administrations, the electronics ban on select airlines from airports aims to improve security and prevent terrorist attacks.
The US Department of Homeland Security on Tuesday, March 21, announced a ban on most electronics devices on nine airlines originating from ten airports.
Declining load factors and unbridled capacity expansion typically result in pricing wars, which was the case throughout 2015.