June 21, 2022

Airline Stock Roundup: 5G Rollout Scare, UAL & DAL’s Q4 Earnings Grab Headlines

Over the past week, US airlines, including Delta Airlines ED and American airlines AAL, raised security concerns about the planned rollout of 5G wireless service near many US airports.

On the earnings front, Delta kicked off the fourth quarter 2021 earnings season for airline stocks on a positive note. DAL reported earnings per share and revenue above expectations for the same period. The results were helped by upbeat air traffic during the holidays. United Airlines UAL posted a lower than expected loss per share for the fourth quarter of 2021. UAL’s performance on the revenue front was encouraging, again due to strong demand for air travel during the holiday season.

traffic side, Allegiant Travel Company ALGT reported impressive traffic figures for December as air travel demand in the United States continues to improve, despite the threat posed by the omicron variant. Latin American carrier Copa Holdings‘December CPA traffic improved by 11.5% compared to November data.

Read the latest roundup of airline stocks here.

Summary of the latest Top Stories

1. Delta’s fourth-quarter 2021 earnings (excluding 86 cents of one-time items) of 22 cents per share beat Zacks’ consensus estimate of 15 cents. Delta’s revenue was $9,470 million, which not only beat Zacks’ consensus estimate of $9,232.1 million, but was also up more than 100% from the reported figure. a year ago, people resorted to air travel during vacations. Due to omicron-induced operational disruptions, DAL expects to incur a loss in the first quarter of 2022.

According to Delta President Glen Hauenstein, “The recent increase in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum picking up from the weekend. end of President’s Day. Factoring this into our outlook, we expect total revenue in the March quarter to recover to 72-76% of 2019 levels, from 74% in the December quarter.” the first quarter of 2022, DAL, currently carrying a Zacks Rank #4 (Sell), expects to operate at capacity within the 83-85% range of Q1 2019 levels.

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

2. United Airlines posted a loss (excluding 39 cents of one-time items) of $1.60 per share in the fourth quarter of 2021, narrower than Zacks consensus estimate of a loss of $2.23 . Operating revenue of $8,192 million also topped Zacks’ consensus estimate of $7,930.9 million. Revenue jumped more than 100% year-over-year, with passenger revenue, accounting for 84% of revenue, climbing 185.4% to $6,878 million. This reflects improving demand for air travel from pandemic-induced lows in 2020. UAL management said its spring and summer travel bookings remain strong.

Nonetheless, with air travel demand remaining below pre-pandemic levels, total revenue fell 24.8% from the fourth quarter of 2019 (pre-pandemic) level. Passenger revenue fell 30.87% from 2019 levels, while cargo revenue jumped more than 100% to $727 million. Revenue from other sources decreased 8.1% from the level in the fourth quarter of 2019 to $587 million.

United Airlines expects first-quarter 2022 capacity to decline 16-18% from the first-quarter 2019 level. UAL expects 2022 capacity to decline from the 2019 reading. Previously, the airline expected a 5% increase from the 2019 level. UAL now expects the 2022 adjusted CASM, excluding fuel, to increase from the 2019 level (previously the same was expected to decrease by compared to the level of 2019).

3. By a Reuters report, the CEOs of major US airlines have warned of a catastrophic aviation crisis if telecommunications companies roll out 5G “C-Band” service. Obviously, Delta warned that some flights could be affected if 5G signals cause limited interference with altitude instruments in certain weather conditions. Airlines are primarily concerned about the rollout of 5G causing poor readings by altimeters (devices that use radio frequencies to measure the distance between planes and the ground and help planes land in bad weather).

4. At Allegiant, scheduled traffic (measured in revenue passenger miles) jumped 100.5% in December 2021 from year-ago levels. Capacity (measured in available seat miles) for scheduled service was up 37.9% from the December 2020 reading. With traffic growth outpacing capacity expansion, load factor ( % of seats occupied by passengers) in December increased by 24.6 points to 78.8% compared to the levels of the period of the previous year. For the whole system (including scheduled service and package contract), Allegiant carried 95.4% more passengers in December 2021 compared to the level of the prior year period.

5. Copa Holdings traffic, measured in Revenue Passenger Miles (RPM), decreased 13.5% to 1.57 billion in December 2021 from the comparable period level in 2019. The decline was primarily due decline in air travel demand due to coronavirus from pre-pandemic levels (2019). Due to weak demand, capacity, measured in available seat miles (ASM), fell 11.8% from the 2019 level to 1.87 billion. With a decline in traffic greater than the reduction in capacity, the load factor (percentage of seats occupied by passengers) deteriorated 160 basis points to 83.8% in December.

Performance

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

Image source: Zacks Investment Research

The chart above shows that all airline stocks have traded in the red over the past week. Consequently, the NYSE ARCA Airline Index fell 2.6% to $82.51 as headwinds such as multiple flight cancellations and 5G concerns weighed on sentiment. investors. Over the past six months, the NYSE ARCA Airline Index has depreciated by 13.5%.

What’s next in airspace?

Fourth quarter earnings reports from select other carriers are expected in the coming days.

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Delta Air Lines, Inc. (DAL): Free Inventory Analysis Report

United Airlines Holdings Inc (UAL): Free Stock Analysis Report

Copa Holdings, SA (CPA): Free Stock Analysis Report

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

Allegiant Travel Company (ALGT): Free Inventory Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.