Southwest Airlines Co
Why Delta’s 3Q14 fuel expense was impacted by fuel hedges
Fuel expense is Delta’s largest expense. It accounted for ~29% of the total operating expense in 3Q14. Fuel consumption per available seat mile decreased by 1.5% during the quarter.
Why fatal disease outbreaks impact economic activity
The World Bank estimated Ebola’s impact by analyzing two scenarios—low Ebola and high Ebola. The scenarios are based on the probability of the disease spreading internationally.
How Soon Can Southwest Airlines (LUV) Restore Its Dividend?
How Can JetBlue Airways’s Valuation Change after Its 2Q16 Earnings?
On July 15, 2016, JetBlue Airways (JBLU) was valued at 4x its forward EV-to-EBITDA. JetBlue’s valuation is slightly lower than its average of 6x.
Aggressive Capacity Growth Subdued Utilization for SAVE and ALGT
The efficiency, or utilization, of an airline’s capacity is measured using the passenger load factor, which is calculated by dividing the traffic numbers by capacity numbers.
US and Chinese Economies Are on Different Trajectories
On April 17, China (FXI) released several economic data points. The country’s first-quarter GDP growth of 6.4% surprised on the upside.
Why Delta Air Lines’ Traffic Fell in August 2016
Delta Air Lines’ (DAL) total traffic fell due to a computer outage. For August 2016, Delta’s traffic fell by 2.8% as compared to the 0.5% capacity growth.
A Look at Airline Stocks’ Recent Performance
Stock performance in 2017 Most airline stocks have continued their gaining streak in 2017. As of February 14, 2017, Southwest Airlines (LUV) has seen the highest YTD (year-to-date) gain of 10.9%, followed by Alaska Airlines (ALK) with 8.5%. Allegiant Travels (ALGT) has gained 5.0%, United Continental (UAL) has gained 1.2%, and Delta Air Lines (DAL) […]
How the Vanguard PRIMECAP Fund Performed in 2015
Vanguard PRIMECAP Fund states that fund managers have a long-term perspective while managing this fund and they do it with an “extremely low turnover.”
What Should Airline Industry Investors Look Out for in 2016?
Growing capacity is necessary for revenue growth. However, capacity expansion that exceeds demand growth can lead to declining utilization.
How Analysts View American Airlines ahead of Q1 Results
American Airlines (AAL), the fourth-largest US air carrier, is expected to report its first-quarter 2019 results on April 24.
Southwest Airlines Increases Third-Quarter Unit Revenue Guidance
Due to increasing crude oil prices, Southwest Airlines (LUV) expects fuel costs to rise more in the third quarter.
Southwest Airlines: Analysts’ Q4 Expectations
Southwest Airlines’ third-quarter revenues rose 5.1% YoY to $5.6 billion. The company’s EPS grew 22.7% YoY to $1.08.
Why Did Analysts Fall Out of Love with Southwest Airlines?
Out of the 18 analysts tracking Southwest Airlines (LUV), 11 analysts (61.1%) have a “buy” recommendation on the stock versus 71% analysts that had a “buy” recommendation on Southwest in 2Q16.
How Does Wall Street View American Airlines?
Out of the total analysts surveyed by Bloomberg, 64.7% of analysts have a “buy” rating on American Airlines, ~35.3% of the analysts have a “hold” rating, and no analysts have a “sell” rating.
Estimating American Airlines’ earnings growth
Apart from improved operational efficiencies, American has outperformed its peers in pre-tax margin (excluding special items) improvement in the first half of 2014 to 8.7% from 4.1% in the previous year.
Airlines Must Balance Load Factors with Capacity Growth
Airlines’ aggressive capacity growth has had an adverse effect on utilization, which has resulted in declining utilizations for most players.
DAL’s Transatlantic Focus Boosts Its Revenue in Q3
On October 11, Delta Air Lines released its third-quarter results. The company’s adjusted EPS of $1.83 came in ahead of analysts’ expectations by $0.09 and registered a whopping 16.6% YoY (year-over-year) increase.
Must-know: Alaska’s commitment to increase shareholder returns
Increases in share prices and dividends provide direct benefits to shareholders. The increases in share prices give better returns. Share repurchases and stock splits provide indirect benefits. Share repurchases lead to a reduction in outstanding shares. This results in increased EPS.
Gol’s passenger revenue increases on higher yields
Brazil is the third largest domestic aviation market. With double-digit traffic growth, Brazil was one of the fastest-growing domestic markets in 2010 and 2011.
Delta Air Lines’ key strategy to increase shareholder returns
Capital expenditure is generally high in the airline industry. Delta manages to keep it low through its strategy of buying used aircraft.
Must-know: Delta Air Lines’ second quarter earnings
Today, Delta is one of the largest airlines in U.S. providing transportation services for passengers and cargo—it serves almost 165 million customers each year to 225 domestic and 97 international destinations.
The Vanguard PRIMECAP Fund Portfolio through November 2015
Information technology and healthcare are the top two sectors. Together, they command slightly less than 65% of the Vanguard PRIMECAP Fund’s assets.
Analysts Maintain Bullish Views on Most Airline Stocks
Analysts recommend “buy” for most airline stocks. Goldman Sachs’ (GS) top picks are American Airlines (AAL) and Spirit Airlines (SAVE), and Credit Suisse’s (CS) favorites are Alaska Air Group (ALK) and Southwest Airlines (LUV).
Are 2016’s Rising Airfares Here to Stay?
Since airlines across the industry have been forecast to beat record profits achieved in 2015, consumers have expected a further fall in airfares.
A Look at How JetBlue’s Unit Revenue Changed in August
Since JetBlue Airways’ (JBLU) traffic growth was higher than its capacity growth, its utilizations improved in August 2016.
United sees major improvement in 3Q14 fuel cost efficiency
United achieved significant fuel cost savings during 3Q14 in the form of lower purchase costs and improved fuel efficiency.
The must-know drivers of air cargo growth for US airlines
According to the IATA, global air freight volume has increased by 4.5%. Capacity, measured by available freight ton kilometers (or AFTK), increased by 3.5% year-over-year in August 2014.
Why JetBlue’s cash position has improved
As of December 2013, JetBlue Airways (JBLU) had cash and cash equivalents of $225 million. JetBlue’s cash position has improved by 24% from $182 million in 2012.
Can American Airlines’ Capacity Continue Its High Growth Rate?
After declining slightly and appearing mostly flat for the past three months, American Airlines’ (AAL) capacity grew by 8% year-over-year in February 2016.
JetBlue Airways Raised Third-Quarter 2018 Guidance
Crude oil prices have been rising throughout 2018 due to supply concerns.
Will Airfares Continue to Decline in 2016?
According to a study by Expedia, airfares fell by about 5% in 2015. Despite this decline, passenger complaints are on the rise. Many consumer leaders also lobbied for airfare reductions.
Why Is JetBlue Airways’s Stock Seeing Negative Momentum?
JetBlue Airways (JBLU) was the only airline stock to have gained more than 50% during 2015, when the stock soared as high as ~65%.
Must-know: Alaska’s increasing return on invested capital
Alaska’s capital expenditure (or capex) mainly includes investment on aircraft. It increased since 2010. In 2013, ~80% of the total cash used for investing activities was on capital expenditure. The total capital expenditure was $566 million. $487 million was on aircraft and aircraft purchase deposits. $79 million was on flight equipment and other property and equipment.
Southwest Airlines Posted Profits while Southwestern Energy Led SPY
Southwest Airlines (LUV) gained 0.5% on January 21 while Delta Air Lines (DAL) went up 1.8% on the day.
BofA Cut Boeing Target Price Due to Rising MAX Uncertainty
On Monday, Bank of America analyst Ronald Epstein lowered his target price on Boeing stock by $10 to $360. However, he maintained his “neutral” rating.
Are Analysts Bullish on United Continental ahead of the 3Q16 Earnings?
According to Bloomberg, 12 out of 16 analysts tracking UAL have issued “buy” recommendations. Four analysts have issued “holds.” None has issued a “sell.”
Why Is Qatar Airways Interested in American Airlines?
In the last week of June 2017, Qatar Airways’ CEO, Akbar Al Baker, disclosed the carrier’s interest in buying a 10% stake worth $808 million in American Airlines through the open market.
Why it’s important for airlines to improve load factor
Load factor measures capacity utilization. It indicates the percentage of total capacity that an airline utilizes. Airlines are capital intensive. They have high fixed costs.
Why United Continental’s high-cost structure affects its margins
In 2013, almost 57% of United’s (UAL) $37,030 million total operating costs comprised fuel costs (33%) and salaries (23%), compared to Delta’s 46%.
Alaska Air: Why Analysts Forecast Higher Revenue in Next 2 Years
For 2Q16, analysts are estimating 4.2% revenue growth for Alaska Air Group (ALK), which is slower than the 6.2% growth in 1Q16.
Low yield, utilization drive down air cargo profitability
Growing trade activity drove the recovery in cargo traffic in emerging markets in Asia, but it was slightly offset by the slowing European economy.
Gol’s increased operating cash flow boosts higher free cash flow
Gol’s financial assets decreased in 3Q14, but its cash balance increased to 1,942 million real from 1,636 million real in FY13.
American’s capital expenditure exceeds cash from 2014 operations
During the nine months of 2014, American Airlines generated $2,276 million cash from operations.
American Airlines gets significantly lower position in Appaloosa
Appaloosa Management significantly lowered its position in American Airlines (AAL) in the third quarter that ended in September 2014. The position accounts for 3.81% of the fund’s total third-quarter portfolio.
Why airlines adopt approaches to improve yield and revenue
Alaska Airlines (ALK) has the lowest yield of $0.148 among all its peers. Its peers include Delta (DAL) at $0.1689, United (UAL) at $0.1614, American (AAL) at $0.1622, and Southwest (LUV) at $0.1602. Revenue management is essential for the airline industry. The industry needs to maximize revenue by selling the most aircraft seats possible to customers at the best price.
Charlie Munger’s View on the Airline Industry
The airline industry is a cyclical industry. The cyclical sector has a sizable correlation with the various phases of the business cycle.
November US airline traffic grows, capacity expansion slowdown
November traffic growth was down compared to 2.7% in October, and growth in capacity picked up from 2% in October.
What Analysts Recommend for Major Airlines’ Stock
Analyst recommendations Among the seven major carriers, most analysts seem to favor Delta Air Lines (DAL). Delta Air Lines has a “buy” rating from 87.5% of analysts covering it. Next is Southwest Airlines (LUV), which has 70.6% of analysts recommending “buy” and 29.4% recommending “hold.” Alaska Airlines (ALK) has 69.2% of analysts recommending “buy” and […]
Changes in the US airline industry’s competitive landscape
The Airline Deregulation Act of 1978 removed all regulations governing the airline routes, airfares, entry, and exit of commercial airlines. Earlier, this was controlled by the Civil Aeronautics Board (or CAB). Airfares and all other factors would be determined by demand and supply market forces.
US airline industry: Summary of share prices and valuations
Southwest outperformed all its peers. Its share price increased 2.6% to $33.77 in September. That said, year-to-date results are positive overall.
Are Analysts Expecting JetBlue Airways’s Revenue to Grow in 2Q16?
Analysts are estimating 2Q16 revenue of ~$1.7 billion for JetBlue Airways (JBLU), which is a year-over-year increase of 2.2%.
Why Delta’s share price increased after 3Q14 earnings release
Delta’s share price increased after the release of its 3Q14 earnings on October 16, 2014. On October 13, 2014, Delta’s share price reached $30.90—the lowest level since February 2014.
How American Airlines Stock Reacted to Its Guidance Update
American Airlines (AAL) stock rose almost 0.94% on September 12, the day of its traffic release.
Key growth trends in airline passenger traffic by region
Global passenger traffic has increased by 5.8% year-over-year during the first eight months of 2014. Europe (29.7%), Asia-Pacifc (29.2%), and North America (25%) comprise ~85% of global market share by passenger traffic.
How Wall Street Analysts View the Major Airlines
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.
Can Spirit Airlines Maintain Its Industry-Leading Margins?
Spirit Airlines’ EBITDA (earnings before interest, tax, depreciation, and amortization) margin is expected to fall to 24.2% in 2016, compared to 26.8% in 2015.
Did Delta’s Guidance Cut Prompt a Losing Streak for Airlines?
Delta Air Lines (DAL) stock fell 3.5% after its traffic release on September 5, 2017. The negativity has spread to other players.
US Airlines Capacity Growth Outpaces Demand, Load Factor Drops
Decreasing load factors across the airline industry mean that airlines are not able to fill up their seats as fast as they are adding seats. This justifies investor fears of overcapacity.
Must-know: Southwest’s airport development initiatives and network expansion
Modernization and development of airports Southwest is involved in the management of various airport development initiatives. Few of them include Southwest entered into an agreement with Broward Country, Florida in 2013 to manage the Fort Lauderdale Hollywood International airport’s Terminal 1 modernization project. Entered into an agreement with city of Houston to expand the Houston […]
How Southwest Airlines Stock Has Performed So Far in 2018
Southwest Airlines (LUV) stock has declined 0.5% since its traffic update on September 12.
Must-know: Alaska Airlines’ aircraft and fuel efficiency
In 2013, Alaska operated a fleet of 131 Boeing 737 jet aircraft. It had contracts with Horizon, Sky West Airlines, and Peninsula Airways for regional capacity. Horizon operated 51 Bombardier Q400 turboprop aircraft. It sells all of its capacity to Alaska according to its capacity purchase agreements.
Magnetar decreases stakes in American Airlines
Magnetar reduced its position in AAL in the third quarter. The position accounts for 1.17% of the fund’s total portfolio in the third quarter.
Key Upcoming Events for the Airline Industry
The global airline industry’s demand grew by 6.5% in 2015, higher than the past ten-year average of 5.5% and the highest growth seen since 2010.
Why Ebola impacted the airline industry
During fatal disease outbreaks, rules and restrictions are imposed—especially on air transportation. This includes canceling flights to the affected areas.
Airline Industry Demand Continues to Grow in August
The demand for air travel experienced considerable growth in the month of August, driven by traditional vacation travel as well as lower fares of major air carriers.
Fornaro’s Turbulent Ride and Achievements at Spirit Airlines
For October, SAVE was ranked third on the metric according to the Department of Transportation. That’s a huge improvement since Spirit has historically been last.
Looking at Investing in JetBlue, Even without Dividends
JetBlue is in its growth phase and prefers to utilize its cash receipts to fund business growth and reduce debt levels. JetBlue currently pays no dividends.
Why Did Buffett Change His Investment Philosophy on Airlines?
Crude oil is trading below $50 per barrel, one of its lowest recent prices, and it is expected to take some time before it recovers, given the huge oversupply.
Is Southwest’s Demand Growth Enough to Fill Its Added Capacity?
In November 2017, Southwest Airlines’ (LUV) traffic grew 3.4% year-over-year (or YoY). This growth was higher than its capacity growth of 2.5% YoY in the same month.
Airline Relative Valuations: What Is Priced In?
The airline industry is capital-intensive, with high levels of depreciation and amortization and varying degrees of debt and operating leases. To neutralize these factors, we use the EV-to-EBITDA ratio to value airline stocks.
What Investors Should Know about Delta Air Lines
Delta Air Lines (DAL) is the third largest domestic airline in the US. The company serves more than 170 million customers each year across the globe.
Alaska Air Group Completes Virgin America Merger
On April 4, 2016, Alaska Air Group (ALK) announced its acquisition of Virgin America for $57 per share in cash, which amounted to $2.6 billion.
Airlines Gain after Delta’s November Traffic Update
Delta Air Lines (DAL) stock rose 1.6% on the day of its November traffic release on December 4, 2017, and its peers also saw rises.
What Wall Street Analysts Recommend for Southwest Airlines
Right now, 36.8% of the analysts tracking Southwest Airlines (LUV) stock have given it “strong buy” ratings. Another 52.6% of analysts have “buy” ratings on the stock.
Wall Street Analysts’ Recommendations for Southwest Airlines
At present, 35.3% of the analysts tracking the Southwest Airlines (LUV) stock have “strong buy” ratings, another 35.3% have “buy” ratings, and 29.4% have “hold” ratings on the stock.
Spirit Airlines: Will Its Capacity Growth Still Outpace Its Peers?
For August 2016, Spirit Airlines’ capacity grew 17.1% YoY—similar to July and the slowest growth compared to other months, so far, in 2016.
How Has American Airlines’ Valuation Changed over the Years?
You should keep watch on American Airlines’ expected future debt reduction, capacity expansion, and future margins since analysts believe that airline margins have peaked.
Why the Ebola scare led to a 16% drop in the Airline Index
The share prices for major airline companies in the U.S. dropped substantially after the news of the first Ebola case in U.S. on September 30, 2014.
Airlines Passenger Yield Continues to Decline in August 2015
Passenger yield declined by 8% year-over-year for August 2015 to 15.3 cents from 16.6 cents. This is the highest decline since the start of the year.
Is a Rerating of Airlines’ Valuation Multiple Possible?
Currently, American Airlines (AAL), Southwest Airlines (LUV), and Alaska Air Group (ALK) are all trading at ~5x their forward EV-to-EBITDA multiples.
Will Delta’s Strong Operational Performance Continue in 2016?
Traffic growth Delta Air Lines (DAL) saw average traffic of about 59.0 million passenger miles for the quarter, a 0.2% year-over-year decline, despite a growth in capacity. This was driven by weak revenues in all of Delta’s markets except Latin America. As of September 2016, traffic had grown by 1.9% YTD (year-to-date) to 163.2 billion […]
Is the US Economy Slowing Down? Trump’s Views versus Buffett’s
On multiple recent occasions, US President Donald Trump has said that the US economy is doing very well.
Analysts’ Recommendations for the US Airline Industry
Of the analysts tracking Delta Air Lines (DAL), 100% have a “buy” rating on the stock. It is followed by Spirit Airlines (SAVE), with 87% of the analysts recommending a “buy” and 13% recommending a “hold.”
S&P 500 Index Nears Record High amid Earnings Season
The S&P 500 Index, represented by the SPDR S&P 500 ETF (SPY), rose 0.3% on October 23, nearing the all-time high it saw in July.
Spirit Airlines: An Introduction to a Low-Cost Pioneer
Spirit Airlines (SAVE) is headquartered in Miramar, Florida. It’s a pioneer of ultra-low-cost carrier or ULCC airlines.
Why Does JetBlue Stock Continue to See Positive Momentum?
JetBlue Airways Corporation (JBLU) is the only airline stock in the industry to have gained more than 50% in 2015.
The global airline industry contributes to economic development
With 16,000 unique city pairs, connectivity by air is estimated to have doubled in the past two decades. Moreover, although demand continues to rise, the price of travel has fallen.
Overview: American Airlines Group Inc.
American Airlines (AAL) is now the largest airline as measured by Available Seat Miles (or ASMs) with a 26% market share.
Airline Mergers and Acquisitions: Are We There Yet?
The most recent phase of consolidation that began in 2005 has seen 13 airline mergers and acquisitions. Four of these deals are worth special mention because they changed the face of the industry.
Profitability outlook of the global airline industry
Apart from the rise in traffic, airlines also benefit from cost efficiencies arising out of lower crude oil prices.
What Does Southwest Airlines’s Current Valuation Tell Us?
Southwest Airlines’s (LUV) current valuation is slightly lower than its average valuation of 4.8x since October 2008.
Initial Reactions from the Travel Industry after Trump’s Win
Just a few days ago, we wrote about how Trump had received very little support from the travel industry. Now that he’s been elected, what’s next?
Spirit Airlines’s Valuation: What Is Priced In ahead of 2Q16 Earnings?
On July 8, 2016, Spirit Airlines (SAVE) was valued at 6.9x its forward EV-to-EBITDA ratio.
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.
How Are Major US Railroads Valued by the Market?
Kansas City Southern (KSU) was trading at a forward PE multiple of 19.5x, the highest in its peer group of major US railroads, on August 26, 2016.
Why Analysts Expect American Airlines’ Revenue to Decline in 2016
For 1Q16, analysts estimate American Airlines’ revenues to decline by 4% to $9.4 billion and then to slow to 2% and 0.5% in 2Q16 and 3Q16, respectively.
What’s Priced In to SAVE’ Stock ahead of Its 3Q16 Earnings?
Despite its fall in 3Q16, Spirit Airlines’ stock continues to be the best performing airline stock in 2016. The stock has risen almost 9% year-to-date.
How Has Southwest Airlines Stock Fared?
Southwest Airlines (LUV) stock has risen 7.5% since its traffic update on December 7, 2017. Its regional peer JetBlue Airways (JBLU) has also risen 0.93%.
JetBlue Airways’ Stock Soars after Its 2Q16 Earnings Release
On July 26, JetBlue reported a 2Q16 revenue increase of 1.9% YoY to ~$1.6 billion. Its EPS also jumped by a strong 20.5% YoY to $0.53 in 2Q16.