Southwest Airlines Co

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.

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.

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.

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.

On April 17, China (FXI) released several economic data points. The country’s first-quarter GDP growth of 6.4% surprised on the upside.

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.

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) […]

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.”

Growing capacity is necessary for revenue growth. However, capacity expansion that exceeds demand growth can lead to declining utilization.

American Airlines (AAL), the fourth-largest US air carrier, is expected to report its first-quarter 2019 results on April 24.

Due to increasing crude oil prices, Southwest Airlines (LUV) expects fuel costs to rise more in the third quarter.

Southwest Airlines’ third-quarter revenues rose 5.1% YoY to $5.6 billion. The company’s EPS grew 22.7% YoY to $1.08.

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.

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.

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’ aggressive capacity growth has had an adverse effect on utilization, which has resulted in declining utilizations for most players.

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.

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.

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.

Capital expenditure is generally high in the airline industry. Delta manages to keep it low through its strategy of buying used aircraft.

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.

Information technology and healthcare are the top two sectors. Together, they command slightly less than 65% of the Vanguard PRIMECAP Fund’s assets.

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).

Since airlines across the industry have been forecast to beat record profits achieved in 2015, consumers have expected a further fall in airfares.

Since JetBlue Airways’ (JBLU) traffic growth was higher than its capacity growth, its utilizations improved in August 2016.

United achieved significant fuel cost savings during 3Q14 in the form of lower purchase costs and improved fuel efficiency.

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.

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.

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.

Crude oil prices have been rising throughout 2018 due to supply concerns.

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.

JetBlue Airways (JBLU) was the only airline stock to have gained more than 50% during 2015, when the stock soared as high as ~65%.

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 (LUV) gained 0.5% on January 21 while Delta Air Lines (DAL) went up 1.8% on the day.

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.

According to Bloomberg, 12 out of 16 analysts tracking UAL have issued “buy” recommendations. Four analysts have issued “holds.” None has issued a “sell.”

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.

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.

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%.

For 2Q16, analysts are estimating 4.2% revenue growth for Alaska Air Group (ALK), which is slower than the 6.2% growth in 1Q16.

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 financial assets decreased in 3Q14, but its cash balance increased to 1,942 million real from 1,636 million real in FY13.

During the nine months of 2014, American Airlines generated $2,276 million cash from operations.

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.

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.

The airline industry is a cyclical industry. The cyclical sector has a sizable correlation with the various phases of the business cycle.

November traffic growth was down compared to 2.7% in October, and growth in capacity picked up from 2% in October.

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 […]

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.

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.

Analysts are estimating 2Q16 revenue of ~$1.7 billion for JetBlue Airways (JBLU), which is a year-over-year increase of 2.2%.

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.

American Airlines (AAL) stock rose almost 0.94% on September 12, the day of its traffic release.

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.

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.

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.

Delta Air Lines (DAL) stock fell 3.5% after its traffic release on September 5, 2017. The negativity has spread to other players.

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.

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 […]

Southwest Airlines (LUV) stock has declined 0.5% since its traffic update on September 12.

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 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.

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.

During fatal disease outbreaks, rules and restrictions are imposed—especially on air transportation. This includes canceling flights to the affected areas.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

You should keep watch on American Airlines’ expected future debt reduction, capacity expansion, and future margins since analysts believe that airline margins have peaked.

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.

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.

Currently, American Airlines (AAL), Southwest Airlines (LUV), and Alaska Air Group (ALK) are all trading at ~5x their forward EV-to-EBITDA multiples.

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 […]

On multiple recent occasions, US President Donald Trump has said that the US economy is doing very well.

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.”

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 (SAVE) is headquartered in Miramar, Florida. It’s a pioneer of ultra-low-cost carrier or ULCC airlines.

JetBlue Airways Corporation (JBLU) is the only airline stock in the industry to have gained more than 50% in 2015.

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.

American Airlines (AAL) is now the largest airline as measured by Available Seat Miles (or ASMs) with a 26% market share.

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.

Apart from the rise in traffic, airlines also benefit from cost efficiencies arising out of lower crude oil prices.

Southwest Airlines’s (LUV) current valuation is slightly lower than its average valuation of 4.8x since October 2008.

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?

On July 8, 2016, Spirit Airlines (SAVE) was valued at 6.9x its forward EV-to-EBITDA ratio.

Alaska Air Group (ALK) currently has the highest forward EV-to-EBITDA multiple of 6.6x.

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.

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.

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.

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%.

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.