In the past week, sectoral heavyweights United Airlines (UAL), Alaska Air Group (ALK), and American Airlines (AAL)  reported earnings for second-quarter 2022.
 

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Even though robust air-travel demand boosted the top lines of these airline operators, high fuel costs limited bottom-line growth. UAL and AAL reported quarterly profits for the first time since the inception of the pandemic.

Delta Air Lines (DAL) announced plans to expand and further modernize its fleet at the Farnborough International Airshow. DAL was also in the news recently when it kickstarted the second-quarter 2022 earnings season for airlines on Jul 13. The story was reported in detail in the previous week’s write up.

Earnings Recap

1. American Airlines’ second-quarter 2022 earnings (excluding 8 cents from non-recurring items) of 76 cents per share fell short of the Zacks Consensus Estimate of 79 cents. Escalated operating expenses induced the earnings miss. In the year-ago quarter, AAL incurred a loss of $1.69 per share when air-travel demand was not as buoyant as in the current scenario. Operating revenues of $13,422 million skyrocketed 79.5% year over year and also surpassed the Zacks Consensus Estimate of $13,409.8 million. This massive year-over-year jump reflects upbeat air-travel demand. AAL, currently carrying a Zacks Rank #3 (Hold), exited the quarter with $15.6 billion of total available liquidity.

2. United Airlines’ second-quarter 2022 earnings (excluding 43 cents from non-recurring items) of $1.43 per share fell short of the Zacks Consensus Estimate of $1.86. Escalated operating expenses induced the earnings miss. Consequently, shares declined in after-market trading on Jul 20. In the year-ago quarter, UAL incurred a loss of $3.91 per share when air-travel demand was not as buoyant as in the current scenario. The second quarter of 2022 was the first profitable quarter at UAL since the onset of the pandemic.

Operating revenues of $12,112 million beat the Zacks Consensus Estimate of $12,033.7 million. Revenues increased more than 100% year over year owing to upbeat air-travel demand. The optimistic air-travel demand scenario is also evident from the fact that total operating revenues increased 6.2% from the second-quarter 2019 (pre-coronavirus) levels. For the third quarter, United Airlines expects capacity to decline around 11% from the third-quarter level of 2019.

3. At Alaska Air, quarterly earnings of $2.19 per share (excluding $1.10 from non-recurring items) beat the Zacks Consensus Estimate of $1.94. The bottom line surged more than 100% year over year.

Operating revenues of $2,658 million outperformed the Zacks Consensus Estimate of $2,590.3 million. The top line surged 74% year over year with passenger revenues accounting for 90.9% of the top line and soaring 79% owing to continued recovery in air-travel demand. Passenger revenues totaled $2,418 million in the reported quarter. On a year-over-year basis, cargo and other revenues rose 14% to $65 million. Mileage plan other revenues grew 48% to $175 million. Alaska Air expects third-quarter 2022 total revenues to increase 16-19% from the third-quarter 2019 actuals.

4.  Delta ordered 12 A220-300 aircraft from European plane maker Airbus. As a result, DAL's firm order for A220s increases to 107 (45 A220-100s and 62 A220-300s).

Per Mahendra Nair, S.V.P., Fleet & TechOps Supply Chain, Delta, “The A220-300 is economical, efficient and delivers superior performance. These additional aircraft in the A220 Family are an excellent investment for our customers and employees and will be fundamental as we work toward a more sustainable future for air travel.”

The A220s will be powered by the highly efficient Pratt & Whitney GTF engines. DAL took delivery of its first Airbus A220 in October 2018. As of Jun 30, 2022, DAL operated a fleet of 388 Airbus planes, including 56 A220s, 249 A320 family planes, 57 A330s and 26 A350-900s.

Performance

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

Image Source: Zacks Investment Research

The table above shows that most airline stocks traded in the green over the five trading days. The NYSE ARCA Airline Index increased 2.8% to $58.91. Over the course of the past six months, the NYSE ARCA Airline Index plummeted 25.8%.
 

What's Next in the Airline Space?

The second-quarter earnings reports from other carriers are scheduled to be out in the coming days.

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