Airline Stock Roundup: Q2 Earnings Beat At Copa Holdings, Narrower Y/Y Loss At Azul & More

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In the past week, Latin American carriers Copa Holdings (CPA - Free Report) and Azul (AZUL - Free Report) reported second-quarter 2023 earnings. The results were aided by upbeat air travel demand and lower fuel costs. Azul‘s loss per share narrowed from a year ago, driven by higher revenues. Second-quarter earnings-related updates were discussed in the previous write-up as well.

Another Latin American carrier, Gol Linhas (GOL - Free Report), was also in the news, courtesy of its impressive traffic report for July. The overall numbers improved as international traffic came roaring back after the pandemic. Strength on the international front also aided Azul’s July traffic report.


Recap of the Past Week’s Most Important Stories

Azul incurred a loss (excluding $1.52 from non-recurring items) of 81 cents per share in the second quarter of 2023, wider than the Zacks Consensus Estimate of a loss of 70 cents. Loss per share was 94 cents in second-quarter 2022. Total revenues amounted to R$4,269.4 million ($862.7 million). The Zacks Consensus Estimate was pegged at $908.3 million. However, the top line increased 7.8% year-over-year as air travel demand improved.

With more people taking to the skies, Azul’s passenger revenues, contributing 92.5% to the top line, increased 11% year-over-year (on higher total capacity). Cargo and other revenues declined 12.4% year-over-year. Consolidated traffic, measured in revenue passenger kilometers, jumped 10% (down 2.6% in domestic, but up 93.8% on the international front) year-over-year.

Consolidated available seat kilometers (ASK), measuring an airline's passenger-carrying capacity, grew 8.4% from the first quarter of 2022, with a 3.4% decline in domestic capacity and 95% rise in international capacity. Since the traffic increase was more than the capacity expansion, the load factor (the percentage of seats filled with passengers) climbed 1.2 percentage points to 79.9%.

Azul’s total revenues per ASK inched up 0.3% and passenger revenues per ASK rose 2.3% year-over-year. Cost per ASK (CASK) decreased 10.5% from the year-ago quarter’s reported figure to $38.89 cents. This mainly stemmed from a fall in jet fuel prices apart from the company’s cost-reduction initiatives and productivity gains.

Fuel cost per liter plunged 24.5% from the prior-year quarter’s reported figure. CASK, excluding fuel, grew 3.2% to $22.15 cents. Average fare rose 6% from the second-quarter 2022 level. Currently, Azul carries a Zacks Rank #3 (Hold).

Load factor was 83.2% in July 2023. Internationally, with revenue passenger kilometers (48.1%) outpacing available seat kilometers (47.5%), the load factor increased to 89.1% from 88.7% in July 2022. On the domestic front, the load factor was 81.5%.

Meanwhile, in July, consolidated revenue passenger kilometers and available seat kilometers increased 6.5% and 3.3%, respectively, on a year-over-year basis. The load factor was 83.4%. On the domestic front, with revenue passenger kilometers (5%) outpacing available seat kilometers (0.7%), the load factor climbed to 83.5% in July 2023 from 80.1% a year ago.

Domestic departures during the month grew 9.2% on a year-over-year basis. On the domestic front, the number of seats increased 9% in July. International departures soared 53.6% in July on a year-over-year basis. The number of seats rose 54.3% internationally.

Additionally, Copa’s second-quarter 2023 earnings of $3.92 per share surpassed the Zacks Consensus Estimate of $3.25 and rose more than 100% year-over-year. Revenues of $809.2 million beat the Zacks Consensus Estimate of $797 million and improved 16.7% year-over-year on the back of passenger revenues.

Passenger revenues (contributed 95.6% to the top line) increased 17.8% from second-quarter 2022, owing to higher load factors and yields. Cargo and mail revenues fell 10.6% to $23.9 million due to lower cargo volumes and yields. Other operating revenues came in at $11.5 million, up 18.6% year-over-year on the back of revenues from non-air ConnectMiles partners.

For 2023, Copa Holdings expects its consolidated capacity to register 12-13% growth from 2022. Operating margin is expected to be between 22% and 24%. Load factor is now expected to be around 86% (prior view: 85%).


Price Performance

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

Zacks Investment Research

Image Source: Zacks Investment Research

The table above shows that majority of the airline stocks traded in the red in the past week. The NYSE ARCA Airline Index declined 1.2% over the period to $67.53. Over the course of the past six months, the sector tracker has increased 10.4%.


What's Next in the Airline Space?

Stay tuned for the usual news updates in this space.


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