Dj Allegiant Travel Company, Inst Holders, 3Q 2024 (Algt)

In the past week, Copa Holdings CPA reported better-than-expected earnings per share for the third quarter of 2024. However, quarterly earnings declined significantly year over year due to high operating costs. Another Latin American carrier Azul AZUL reported a wider-than-expected loss per share for the third quarter of 2024.

United Airlines UAL expects passenger volumes to be high this winter holiday season, driven by increased travel to European destinations. Allegiant Travel ALGT reported disappointing traffic numbers for October. Spirit Airlines filed for bankruptcy protection, which was widely expected after its merger talks with Frontier Airlines, which is owned by Frontier Group ULCC, halted.

Recap of the Recent Most Important Stories

1. Copa Holdings’ third-quarter 2024 earnings per share of $3.50 surpassed the Zacks Consensus Estimate of $3.48 but declined 20.3% year over year. Revenues of $854.7 million lagged the Zacks Consensus Estimate of $860.3 million and fell 1.5% year over year. Passenger revenues (which contributed 95.7% to the top line) decreased 1.8% from the third quarter of 2023. The downside was mainly led by the last-minute suspension of flights between Panama and Venezuela at the end of July, weaker currencies in Latin America, and increased industry capacity in the region. As a result, passenger yield declined 8.7% year over year and load factor (percentage of seats filled by passengers) decreased 1.6 percentage points.

CPA’s management expects current-year consolidated capacity to grow 9% year over year. The load factor is anticipated at 86% (prior view: 86.5%). The operating margin for the current year is expected to be 21-22%.

CPA was also in the news recently, owing to its upbeat traffic report for October. That news was covered in detail in the previous week’s write-up.

CPA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. Azul incurred a loss of 32 cents per share in the third quarter of 2024, wider than the Zacks Consensus Estimate of a loss of 10 cents. Total revenues of $925.1 million lagged the Zacks Consensus Estimate of $953.2 million. With more people taking to the skies, Azul’s passenger revenues, contributing 92.8% to the top line, grew 4% year over year. For 2024, Azul expects capacity to increase 6% (prior view: 7% growth) from 2023.

3. United Airlines, which had a busy summer this year, carrying a record 48 million passengers, expects travel to surge this winter, led by increased travel to Europe. UAL stated that bookings to European destinations have been exceptionally strong, and have moved up nearly 30% from that recorded in 2019 and 10% year over year. Driven by upbeat passenger volumes, UAL expects to carry 25 million passengers during the holiday period, up 6% from the year-ago level.

4. At Allegiant, scheduled traffic (measured in revenue passenger miles) fell 15.7% from October 2023. Capacity (measured in available seat miles) for scheduled service fell 10.2% year over year. As traffic reduction was more than capacity contraction, the load factor in October 2024 declined to 78.5% from 83.7% a year ago.

5. Budget carrier Spirit Airlines filed for bankruptcy protection and reached an agreement to restructure its debt with its bondholders. Spirit Airlines flights will continue normally during the bankruptcy process. The financially ailing Spirit Airlines was dealt a body blow after the merger talks with Frontier Airlines fell through. Spirit Airlines' mounting debt, combined with declining revenues and rising costs, contributed to it ultimately filing for Chapter 11 bankruptcy protection. As part of the restructuring support agreement with existing bondholders, Spirit Airlines has received backstopped commitments for a $350-million equity investment. Spirit Airlines will complete a deleveraging transaction to equitize $795 million of funded debt.

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 6.9% to $63.94, as most stocks in the table above traded in the red. Over the past six months, the NYSE ARCA Airline Index increased 2.3%.

What’s Next in the Airline Space?

With the earnings season over, we expect updates from many carriers regarding their plans to meet the anticipated demand swell during the winter travel season.

Zacks Investment Research

By Stephen Nakrosis

Allegiant Travel said its Allegiant Air subsidiary amended a delivery agreement with Boeing, giving the aircraft maker two additional years to deliver 50 737 MAX jets.

The new pact, which amends a December 2021 deal, moves the delivery deadline for Boeing to the end of 2027 from the end of 2025. The amended agreement also provides for other benefits and considerations related to delivery delays in 2024, Allegiant disclosed in a Securities and Exchange Commission filing Wednesday.

The company accepted delivery of its first 737-8200 aircraft in September, it said. It also expects that it could receive up to three additional aircraft from Boeing during the fourth quarter with the eight-week machinist strike at the aircraft maker now ended.

In a companywide meeting earlier Wednesday, Boeing CEO Kelly Ortberg said the company won't turn cash-flow positive until it accelerates 737 production to the target of 38 jets a month it aimed to hit by the end of 2023, The Wall Street Journal reported.

In addition to recent job cuts and furloughs, some research-and-development spending may need to be delayed, Ortberg said, as the company is burning through cash. It previously warned that its operations would continue to use up cash through next year as it reported a $6.17 billion quarterly loss last month.

Allegiant Travel, meanwhile, last month reported a third-quarter loss of $2.05 a share on revenue of $565.2 million during its generally weakest quarter by season, according to CEO Gregory Anderson. The quarterly results were also hurt by the CrowdStrike outage that afflicted a number of carriers in July and the effects of Hurricane Helene.

Allegiant reported holding cash and cash equivalents of $265.9 million at Sept. 30.

Shares of the leisure-travel company closed up 2.7%, at $72.70. Boeing shares ended the day about flat, at $146.08.

Write to Stephen Nakrosis at stephen.nakrosis@wsj.com

By Stephen Nakrosis

Allegiant Travel said its Allegiant Air subsidiary amended a delivery agreement with aircraft manufacturer Boeing, extending the delivery schedule for 50 737 MAX aircraft.

The new agreement amends a December 2021 agreement, which called for Boeing to deliver the aircraft by the end of 2025. Under the new arrangement, Boeing has until the end of 2027 to fulfill the order. The amended deal also provides for other benefits and considerations, Allegiant said.

The company also said it accepted delivery of its first Boeing 737-8200 aircraft in September, and expects it could receive up to three additional aircraft during the fourth quarter of this year.

The news comes the same day The Wall Street Journal reported that Boeing's Chief Executive Officer, Kelly Ortberg, told employees the manufacturer can't afford to make another mistake during a companywide meeting.

Write to Stephen Nakrosis at stephen.nakrosis@wsj.com