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In the past week, Alaska Air Group (ALK - Free Report) gave a bullish outlook for the third quarter of 2024, mainly driven by the strong air-travel demand during summer. Delta Air Lines (DAL - Free Report) expects the CrowdStrike (CRWD - Free Report) -induced global IT outage on July 19 to hurt its third-quarter 2024 earnings by 45 cents per share.
American Airlines (AAL - Free Report) received encouraging tidings on the labor front when the Association of Professional Flight Attendants announced that flight attendants of the airline have ratified a new five-year contract. Alaska Air’s $1.9 billion takeover of Hawaiian Holdings cleared the review of the Department of Transportation or DOT.
Recap of the Recent Most Important Stories
1. Driven by higher revenues during the summer and lower fuel costs, Alaska Air raised its third-quarter 2024 adjusted earnings per share guidance to the range of $2.15-$2.25 compared with the previous guidance of $1.40 to $1.60.
ALK now expects its third-quarter 2024 revenue per available seat mile (a key measure of unit revenues) to be up 2% on a year-over-year basis compared with the previous forecast of flat to positive. ALK now anticipates third-quarter 2024 economic fuel cost per gallon in the range of $2.60-$2.70 (prior view: $2.85-$2.95).
2. The global technology outage on July 19, caused by security software provider CrowdStrike’s software update, hit Delta Air Lines the hardest among the U.S. airlines. Following the faulty software update, DAL’s operations were crippled more than others due to its dependence on Microsoft systems for flight crew scheduling. As a result, approximately 7,000 DAL flights were canceled due to the outage, causing not only revenue loss but harassment to passengers.
Following the outage, DAL is now forecasting revenues to be flat or up no more than 1% for the quarter rather than up 2-4% as originally predicted. Capacity is now expected to increase approximately 4% (earlier guidance was for an increase in the 5-6% range). Non-fuel unit costs are now projected to increase 5.5% year over year (earlier guidance was for an increase in the 1-2% range). Full-year 2024 earnings per share are expected to be at or above the midpoint of the $6-$7 guided range (excluding the 45-cent impact from the IT outage on third-quarter earnings).
3. The ratification of the contract at AAL with flight attendants increased the value of the current agreement by $4.2 billion. With 95% of eligible flight attendants casting their votes, 87% of American Airlines flight attendants voted in favor of the contract, which takes effect from Oct. 1, 2024. American Airlines flight attendants become eligible for wage increases of up to 20.5% and substantial retroactive pay to compensate for the time spent negotiating.
AAL was also in the news recently due to its impending exit from the S&P 500 index. That news was covered in detail in the previous week’s write-up.
4. Alaska Air closed the deal of taking over Hawaiian Airlines after receiving clearance from the DOT. Receipt of clearance removes the final hurdle before the closure of the deal. DOT, however, stated that the airlines must maintain the value of their airline reward systems and preserve several key routes. Following the closure of the deal, Hawaiian Airlines serves as a wholly-owned subsidiary of ALK. Alaska Airhas formed an interim leadership team in Honolulu to oversee Hawaiian Airlines' operations until the two airlines are fully integrated.
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
What’s Next in the Airline Space?
Following the closure of Alaska Air’s merger deal with Hawaiian Airlines, investors are waiting for details regarding the integration process. With buoyant air-travel demand, updates on route additions by airlines to match the demand swell cannot be ruled out.
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In the past week, Alaska Air Group (ALK - Free Report) gave a bullish outlook for the third quarter of 2024, mainly driven by the strong air-travel demand during summer. Delta Air Lines (DAL - Free Report) expects the CrowdStrike (CRWD - Free Report) -induced global IT outage on July 19 to hurt its third-quarter 2024 earnings by 45 cents per share.
American Airlines (AAL - Free Report) received encouraging tidings on the labor front when the Association of Professional Flight Attendants announced that flight attendants of the airline have ratified a new five-year contract. Alaska Air’s $1.9 billion takeover of Hawaiian Holdings cleared the review of the Department of Transportation or DOT.
Recap of the Recent Most Important Stories
1. Driven by higher revenues during the summer and lower fuel costs, Alaska Air raised its third-quarter 2024 adjusted earnings per share guidance to the range of $2.15-$2.25 compared with the previous guidance of $1.40 to $1.60.
ALK now expects its third-quarter 2024 revenue per available seat mile (a key measure of unit revenues) to be up 2% on a year-over-year basis compared with the previous forecast of flat to positive. ALK now anticipates third-quarter 2024 economic fuel cost per gallon in the range of $2.60-$2.70 (prior view: $2.85-$2.95).
ALK 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 global technology outage on July 19, caused by security software provider CrowdStrike’s software update, hit Delta Air Lines the hardest among the U.S. airlines. Following the faulty software update, DAL’s operations were crippled more than others due to its dependence on Microsoft systems for flight crew scheduling. As a result, approximately 7,000 DAL flights were canceled due to the outage, causing not only revenue loss but harassment to passengers.
Following the outage, DAL is now forecasting revenues to be flat or up no more than 1% for the quarter rather than up 2-4% as originally predicted. Capacity is now expected to increase approximately 4% (earlier guidance was for an increase in the 5-6% range). Non-fuel unit costs are now projected to increase 5.5% year over year (earlier guidance was for an increase in the 1-2% range). Full-year 2024 earnings per share are expected to be at or above the midpoint of the $6-$7 guided range (excluding the 45-cent impact from the IT outage on third-quarter earnings).
3. The ratification of the contract at AAL with flight attendants increased the value of the current agreement by $4.2 billion. With 95% of eligible flight attendants casting their votes, 87% of American Airlines flight attendants voted in favor of the contract, which takes effect from Oct. 1, 2024. American Airlines flight attendants become eligible for wage increases of up to 20.5% and substantial retroactive pay to compensate for the time spent negotiating.
AAL was also in the news recently due to its impending exit from the S&P 500 index. That news was covered in detail in the previous week’s write-up.
4. Alaska Air closed the deal of taking over Hawaiian Airlines after receiving clearance from the DOT. Receipt of clearance removes the final hurdle before the closure of the deal. DOT, however, stated that the airlines must maintain the value of their airline reward systems and preserve several key routes. Following the closure of the deal, Hawaiian Airlines serves as a wholly-owned subsidiary of ALK. Alaska Airhas formed an interim leadership team in Honolulu to oversee Hawaiian Airlines' operations until the two airlines are fully integrated.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
What’s Next in the Airline Space?
Following the closure of Alaska Air’s merger deal with Hawaiian Airlines, investors are waiting for details regarding the integration process. With buoyant air-travel demand, updates on route additions by airlines to match the demand swell cannot be ruled out.