Since the COVID-19 pandemic, the airline industry has been under pressure due to travel restrictions, staffing shortages, and flight delays and cancellations. However, the industry has been rebounding with the resumption of leisure travel and the easing restrictions.
According to a recent study, in April global flight bookings for leisure travel soared 25% above pre-pandemic levels. Furthermore, international air travel is witnessing a solid recovery, with an approximate 60% growth rate, especially in the United States, Latin America, and Europe. The global airline market is projected to grow at a 12.7% CAGR to reach $744 billion by 2026.
The stock market has been experiencing wild swings amid rising inflation, the Fed’s monetary policy tightening, and the Russia-Ukraine war. Nevertheless, despite the market downturn, airline stocks Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV), and United Airlines Holdings, Inc. (UAL) have been surging in price this year.
Delta Air Lines, Inc. (DAL)
DAL in Atlanta, Ga., provides scheduled air transportation for passengers and cargo in the United States and internationally. The company operates through two segments: Airline and Refinery.
In March 2022, Gevo, Inc. (GEVO), a renewable fuels company, signed a take-or-pay agreement with DAL to supply 75 million gallons of sustainable aviation fuel (SAF) per year for seven years. This should help DAL use a viable climate solution that benefits air travel.
DAL’s total operating revenues increased 125.3% year-over-year to $9.35 billion in its fiscal quarter ended March 31, 2022, while its net cash provided by operating activities grew 156.3% from its year-ago value to $1.77 billion.
The $1.58 consensus EPS estimate for the fiscal quarter ending Sept. 30, 2022, represents a 426.7% improvement year-over-year. The $13.29 billion consensus revenue estimate for the same quarter represents a 45.1% increase from the same period last year. It has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
Over the past three months, DAL stock has gained 13% in price to close the last trading session at $39.
Southwest Airlines Co. (LUV)
LUV in Dallas, Tex. operates as a passenger airline company that provides scheduled air transportation services in the United States and near-international markets.
On June 1, 2022, LUV announced an investment in SAFFiRE Renewables, LLC, a company formed by D3MAX, LLC (D3MAX), as a part of a Department of Energy (DOE)-backed project to develop and produce scalable, sustainable aviation fuel (SAF). This is expected to aid the replacement of up to 5% of LUV’s jet fuel with SAF by 2030 and help the industry reach its carbon neutrality goal by 2050.
On May 17, the company launched Wanna Get Away Plus™, a new fare program that adds more flexibility, options, and rewards to the carrier’s fare lineup, while maintaining all the benefits of the existing fare. This innovation should enhance the company’s revenue stream.
For its fiscal quarter ended March 31, 2022, its total operating revenues increased 128.8% year-over-year to $4.69 billion. Its net cash provided by operating activities grew 66% from its year-ago value to $1.07 billion, while its cash and cash equivalents balance stood at $13.10 billion, reflecting a 9.4% increase year-over-year.
The Street expects LUV’s EPS for its fiscal quarter ending Dec. 31, 2022, to improve 527.8% year-over-year to $0.88. The $6.44 billion consensus revenue estimate for the same period represents a 27.5% increase year-over-year.
LUV’s shares have gained 9.2% in price over the past three months to close the last trading session at $44.42. The stock has gained 3.7% year-to-date.
United Airlines Holdings, Inc. (UAL)
Chicago-based UAL provides air transportation services in America and internationally. The company transports people and cargo through its mainline and regional fleets.
On May 19, UAL opened its largest club at Newark Liberty International Airport, offering travelers a modern design, enhanced amenities, and culinary offerings. “As more and more customers return to the skies, United is committed to delivering a superior customer experience on and off the plane, especially in increasingly crowded airports,” said Aaron McMillan, United’s managing director of hospitality and planning.
UAL’s total operating revenue increased 134.9% from the prior-year quarter to $7.66 billion in its fiscal quarter ended March 31, 2022. Its net cash provided by operating activities for the quarter came in at $1.48 billion, reflecting an increase of 230.2% year-over-year, while its cash, cash equivalents, and restricted cash balance stood at $18.72 billion, up 42.5% year-over-year.
Analysts expect UAL’s revenue for its fiscal quarter ending June 30, 2022, to be $11.94 billion, indicating an increase of 118.2% year-over-year. Also, the company’s revenue is expected to grow 75.2% year-over-year to $43.16 billion in the current fiscal year.
Over the past three months, the stock has gained 21.9% in price to close yesterday’s trading session at $44.76. The stock gained 2.2% year-to-date.
DAL shares fell $39.00 (-100.00%) in premarket trading Tuesday. Year-to-date, DAL has declined -1.59%, versus a -13.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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