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Airline Stock Roundup: LUV's Summer Season Update, RYAAY's Traffic
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In the past week, Dallas-based Southwest Airlines (LUV - Free Report) revealed that it performed very well during the summer season (May 24-Sept. 2), making most of the upbeat air travel demand scenario. The completion factor (percentage of scheduled flights completed without cancellation or diversion) at LUV improved on a year-over-year basis during the period.
Driven by upbeat passenger volumes, European carrier Ryanair Holdings (RYAAY - Free Report) reported impressive traffic numbers for August. Latin American carrier Azul’s (AZUL - Free Report) credit rating was downgraded by S&P Global Ratings, citing multiple headwinds.
Recap of the Recent Most Important Stories
1. Southwest Airlines operated more than 414,000 flights during the summer season, carrying a record 54 million passengers. Reflecting the highly impressive on-time performance, the completion factor during summer was 99.3% compared with 97.3% a year ago. On Labor Day, there were no flight cancellations, resulting in LUV achieving a completion factor of 100% on the day. Exhibiting delight at the strong operational performance, Bob Jordan, president, CEO & vice chairman of LUV’s board, said, "I'm so proud of our employees for staying focused on safety and running a great operation this Labor Day, and all summer long.”
Apart from the strong operational performance, Southwest Airlines has also been in the news due to the pressure on management by hedge fund Elliott Investment Management. The hedge fund now holds 11% of LUV’s common stock, crossing the 10% threshold needed to call a special meeting. Elliott, one of the world's most prominent investors, aims to discuss with the carrier’s management and push for changes at LUV.
2. The number of passengers transported on Ryanair flights was 20.5 million in August 2024, reflecting an 8% year-over-year increase. The August load factor (percentage of seats filled by passengers) of 96% remained flat sequentially as well as on a year-over-year basis. The figure was higher than the load factor of 95% reported in June and May, 92% reported in April 2024 and 93% reported in March 2024. Notably, RYAAY operated more than 111,800 flights in August 2024.
Ryanair was also in the news when its CEO stated that the downward trend witnessed during summer pertaining to average fares has leveled out. The story was reported in detail in the previous week’s write-up.
3. Due to weaker-than-expected first-half 2024 results and lackluster liquidity, rating agency S&P downgraded its global scale issuer credit rating on Azul to “CCC+” from “B-” and the national scale rating to “brBB-” from “brBBB-.” The depreciation of the Brazilian real and a reduction in capacity and yields hurt AZUL’s second-quarter results.
The rating agency’s negative outlook on AZUL reflects that ratings may be lowered further in the next six to 12 months if the Brazilian carrier’s cash flow generation and ability to access long-term financing weaken. The rating agency forecasts AZUL’s free operating cash flow deficits after lease payments of about R$1.6 billion this year and 2025.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
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The NYSE ARCA Airline Index decreased 1.6% $50.83. Over the past six months, the NYSE ARCA Airline Index decreased by 21.3%.
What’s Next in the Airline Space?
News updates are likely to hog the limelight with the earnings season over. Apart from traffic-related news, updates pertaining to airfares and the reduced pricing power of airlines cannot be ruled out going forward. With air travel demand remaining strong, airlines are likely to add routes to match the buoyancy.
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Airline Stock Roundup: LUV's Summer Season Update, RYAAY's Traffic
In the past week, Dallas-based Southwest Airlines (LUV - Free Report) revealed that it performed very well during the summer season (May 24-Sept. 2), making most of the upbeat air travel demand scenario. The completion factor (percentage of scheduled flights completed without cancellation or diversion) at LUV improved on a year-over-year basis during the period.
Driven by upbeat passenger volumes, European carrier Ryanair Holdings (RYAAY - Free Report) reported impressive traffic numbers for August. Latin American carrier Azul’s (AZUL - Free Report) credit rating was downgraded by S&P Global Ratings, citing multiple headwinds.
Recap of the Recent Most Important Stories
1. Southwest Airlines operated more than 414,000 flights during the summer season, carrying a record 54 million passengers. Reflecting the highly impressive on-time performance, the completion factor during summer was 99.3% compared with 97.3% a year ago. On Labor Day, there were no flight cancellations, resulting in LUV achieving a completion factor of 100% on the day. Exhibiting delight at the strong operational performance, Bob Jordan, president, CEO & vice chairman of LUV’s board, said, "I'm so proud of our employees for staying focused on safety and running a great operation this Labor Day, and all summer long.”
Apart from the strong operational performance, Southwest Airlines has also been in the news due to the pressure on management by hedge fund Elliott Investment Management. The hedge fund now holds 11% of LUV’s common stock, crossing the 10% threshold needed to call a special meeting. Elliott, one of the world's most prominent investors, aims to discuss with the carrier’s management and push for changes at LUV.
LUV currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
2. The number of passengers transported on Ryanair flights was 20.5 million in August 2024, reflecting an 8% year-over-year increase. The August load factor (percentage of seats filled by passengers) of 96% remained flat sequentially as well as on a year-over-year basis. The figure was higher than the load factor of 95% reported in June and May, 92% reported in April 2024 and 93% reported in March 2024. Notably, RYAAY operated more than 111,800 flights in August 2024.
Ryanair was also in the news when its CEO stated that the downward trend witnessed during summer pertaining to average fares has leveled out. The story was reported in detail in the previous week’s write-up.
3. Due to weaker-than-expected first-half 2024 results and lackluster liquidity, rating agency S&P downgraded its global scale issuer credit rating on Azul to “CCC+” from “B-” and the national scale rating to “brBB-” from “brBBB-.” The depreciation of the Brazilian real and a reduction in capacity and yields hurt AZUL’s second-quarter results.
The rating agency’s negative outlook on AZUL reflects that ratings may be lowered further in the next six to 12 months if the Brazilian carrier’s cash flow generation and ability to access long-term financing weaken. The rating agency forecasts AZUL’s free operating cash flow deficits after lease payments of about R$1.6 billion this year and 2025.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
The NYSE ARCA Airline Index decreased 1.6% $50.83. Over the past six months, the NYSE ARCA Airline Index decreased by 21.3%.
What’s Next in the Airline Space?
News updates are likely to hog the limelight with the earnings season over. Apart from traffic-related news, updates pertaining to airfares and the reduced pricing power of airlines cannot be ruled out going forward. With air travel demand remaining strong, airlines are likely to add routes to match the buoyancy.