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Airline Industry Appreciates 7.1% in Q1: More Upside Ahead?
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It is no secret that the airline industry was one of the worst-hit corners during the pandemic. After being battered in 2020 and 2021, with passenger revenues shrinking drastically, the fortunes of the industry players turned for the better in 2022 as air traffic (particularly for leisure) started bouncing back following the easing of the pandemic-induced restrictions.
The scenario has brightened further this year with business travel making a recovery. Leisure travel trends are strong as well with vacationers making up for lost time. The resurgence in air-travel demand is solely responsible for the Zacks Airline industry gaining 7.1% in first-quarter 2023 (January-March period) despite headwinds like inflation-induced economic uncertainty and high fuel costs.
The bright scenario is highlighted by data provided by the Transportation Security Administration (TSA) with respect to passenger volumes. In the January-March period this year, TSA checkpoint numbers revealed that passenger volumes not only surpassed 2022 levels but also exceeded 2019 (pre-coronavirus) numbers on many days.
Airlines Likely to Fly High Throughout 2023
The buoyancy with respect to passenger volumes, witnessed in the first quarter of the year, is likely to remain throughout the year. In fact, the scenario is likely to get brighter in the United States in the upcoming summer season. Many U.S. airlines are adjusting their summer schedules to meet the anticipated demand swell.
Passenger volumes are high not only in the United States but globally. This led the International Air Transport Association (IATA) to expect airlines to return to profitability this year. Net profits for airlines across the globe are likely to be $4.7 billion in 2023.
With people again taking to the skies, passenger revenues, which account for the bulk of the top line for most airlines, are likely to regain their lost glory in 2023. Per IATA, passenger revenues for the current year are anticipated to be $522 billion (85.5% of 2019 levels).
The focus of airlines on boosting cargo revenues is an added positive. IATA anticipates 2023 cargo revenues to be around $150 billion, suggesting an increase of nearly $48.6 billion from the pre-pandemic level of 2019.
3 Airline Stocks to Keep a Tab on
Given this buoyant scenario, we believe that investors interested in the Zacks Airline industry should keep stocks like American Airlines (AAL - Free Report) , Copa Holdings (CPA - Free Report) and JetBlue Airways (JBLU - Free Report) on their watchlist for healthy returns. Driven by the stronger-than-expected recovery in air-travel demand, all the abovementioned stocks have outperformed the industry with respect to price in the first quarter of this year.
Image Source: Zacks Investment Research
Copa Holdings is benefiting from the improvement in air-travel demand. In fourth-quarter 2022, passenger revenues increased 29.5%, owing to higher yields. CPA’s focus on its cargo segment is encouraging too. In fourth-quarter 2022, cargo and mail revenues grew 69%, owing to higher cargo volumes and yields. Copa Holdings' fleet modernization and cost-management efforts are commendable as well.
The abovementioned tailwinds are likely to continue aiding this Latin American carrier, currently sporting a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for current-year earnings has been revised 12.3% upward over the past 60 days. CPA has a Growth Score of A.
American Airlines, currently carrying a Zacks Rank of 2 (Buy), is seeing steady recovery in domestic air-travel demand. AAL has an expected earnings growth rate of more than 100% for the current year.
The Zacks Consensus Estimate for AAL’s current-year earnings has improved 10.8% over the past 60 days. AAL delivered a trailing four-quarter earnings surprise of 7.79%, on average.
JetBlue Airways is benefiting from the buoyant air-travel-demand scenario and fleet-upgrade efforts. With air-travel demand expected to remain strong going forward as well, management expects total revenues for 2023 to increase year over year in the high single-digit to low double-digit range.
The Zacks Consensus Estimate for current-year earnings at JetBlue has been revised 9.4% upward over the past 60 days. JBLU, presently, has a Growth Score of B and carries a Zacks Rank #3 (Hold).
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Airline Industry Appreciates 7.1% in Q1: More Upside Ahead?
It is no secret that the airline industry was one of the worst-hit corners during the pandemic. After being battered in 2020 and 2021, with passenger revenues shrinking drastically, the fortunes of the industry players turned for the better in 2022 as air traffic (particularly for leisure) started bouncing back following the easing of the pandemic-induced restrictions.
The scenario has brightened further this year with business travel making a recovery. Leisure travel trends are strong as well with vacationers making up for lost time. The resurgence in air-travel demand is solely responsible for the Zacks Airline industry gaining 7.1% in first-quarter 2023 (January-March period) despite headwinds like inflation-induced economic uncertainty and high fuel costs.
The bright scenario is highlighted by data provided by the Transportation Security Administration (TSA) with respect to passenger volumes. In the January-March period this year, TSA checkpoint numbers revealed that passenger volumes not only surpassed 2022 levels but also exceeded 2019 (pre-coronavirus) numbers on many days.
Airlines Likely to Fly High Throughout 2023
The buoyancy with respect to passenger volumes, witnessed in the first quarter of the year, is likely to remain throughout the year. In fact, the scenario is likely to get brighter in the United States in the upcoming summer season. Many U.S. airlines are adjusting their summer schedules to meet the anticipated demand swell.
Passenger volumes are high not only in the United States but globally. This led the International Air Transport Association (IATA) to expect airlines to return to profitability this year. Net profits for airlines across the globe are likely to be $4.7 billion in 2023.
With people again taking to the skies, passenger revenues, which account for the bulk of the top line for most airlines, are likely to regain their lost glory in 2023. Per IATA, passenger revenues for the current year are anticipated to be $522 billion (85.5% of 2019 levels).
The focus of airlines on boosting cargo revenues is an added positive. IATA anticipates 2023 cargo revenues to be around $150 billion, suggesting an increase of nearly $48.6 billion from the pre-pandemic level of 2019.
3 Airline Stocks to Keep a Tab on
Given this buoyant scenario, we believe that investors interested in the Zacks Airline industry should keep stocks like American Airlines (AAL - Free Report) , Copa Holdings (CPA - Free Report) and JetBlue Airways (JBLU - Free Report) on their watchlist for healthy returns. Driven by the stronger-than-expected recovery in air-travel demand, all the abovementioned stocks have outperformed the industry with respect to price in the first quarter of this year.
Image Source: Zacks Investment Research
Copa Holdings is benefiting from the improvement in air-travel demand. In fourth-quarter 2022, passenger revenues increased 29.5%, owing to higher yields. CPA’s focus on its cargo segment is encouraging too. In fourth-quarter 2022, cargo and mail revenues grew 69%, owing to higher cargo volumes and yields. Copa Holdings' fleet modernization and cost-management efforts are commendable as well.
The abovementioned tailwinds are likely to continue aiding this Latin American carrier, currently sporting a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for current-year earnings has been revised 12.3% upward over the past 60 days. CPA has a Growth Score of A.
You can see the complete list of today’s Zacks #1 Rank stocks here.
American Airlines, currently carrying a Zacks Rank of 2 (Buy), is seeing steady recovery in domestic air-travel demand. AAL has an expected earnings growth rate of more than 100% for the current year.
The Zacks Consensus Estimate for AAL’s current-year earnings has improved 10.8% over the past 60 days. AAL delivered a trailing four-quarter earnings surprise of 7.79%, on average.
JetBlue Airways is benefiting from the buoyant air-travel-demand scenario and fleet-upgrade efforts. With air-travel demand expected to remain strong going forward as well, management expects total revenues for 2023 to increase year over year in the high single-digit to low double-digit range.
The Zacks Consensus Estimate for current-year earnings at JetBlue has been revised 9.4% upward over the past 60 days. JBLU, presently, has a Growth Score of B and carries a Zacks Rank #3 (Hold).