Zacks airlines are benefiting from brisk demand for air travel, both domestic and international. Positive passenger volume has always been a tailwind. Higher bookings contribute to airlines’ revenue growth. While demand for air travel is particularly strong in the leisure sector, business travel has also made an encouraging comeback.
Due in part to these tailwinds, we expect the Zacks Airline industry to have grown 13.5% so far this year, outperforming the broader Zacks Transportation sector’s 2.9% decline.
Image source: Zacks Investment Research
On the other hand, the outlook of industry players is being affected by high labor costs. As US airlines are grappling with labor shortages in the post-COVID high-demand situation, the bargaining power of various groups of workers has naturally increased. As a result, we have seen agreements on salary increases being reached in this area. This is leading to an increase in labor costs.
For example, United Airlines (UAL – Free report), consolidated costs per available seat mile, excluding fuel, third-party business expenses, profit sharing and special charges, increased 2.1% year-over-year in the second quarter of 2024. American Airlines Inc. (LOVE – Free report) ) Consolidated unit costs, or costs per available seat mile (CASM), excluding fuel, oil, profit-sharing and special items, increased 6% in the second quarter of 2024 compared to the previous year.
In addition, there are production delays in Boeing (BA) are damaging the fleet plans of airlines in the US. Weak pricing power also remains a problem.
With this in mind, we take a look at the July 2024 traffic reports from Copa Holdings (CPA – Free report), Ryanair Holdings (RYAAY – Free report) and Allegiant Travel Company (ALGT – Free report).
July 2024 traffic reports: CPA, RYAAY and ALGT
Due to the high passenger volume Copa Holdings’ Sold passenger miles (a measure of traffic) rose double-digits year-over-year in July. To meet increased demand, CPA is increasing its capacity. In July, available seat miles (a measure of capacity) increased 11.3% year-over-year. Sold passenger miles increased 9.5% year-over-year. Although traffic improved year-over-year, it could not outpace the capacity expansion. As a result, load factor (percent of seats filled with passengers) fell to 87.6% from 89% in July 2023.
Rising demand for air travel has boosted Copa Holdings’ revenue. Management expects load factor (percent of seats filled with passengers) to be 86.5% for the current year, assuming the rosy traffic scenario continues. For 2024, the company expects consolidated capacity, or available seat miles, to grow 9% year over year. Operating margin is forecast in the range of 21-23%. CPA currently has a Zacks Rank #4 (Sell).
Ryanaira European airline, also reported solid traffic numbers for July 2024, driven by increasing demand for air travel. RYAAY currently has a Zacks Rank #5 (Strong Sell).
The number of passengers carried on Ryanair flights in July 2024 was 20.2 million, an increase of 8% year-on-year. RYAAY’s traffic in July was significantly higher than June’s figure of 19.3 million, May’s figure of 18.9 million, April’s figure of 17.3 million and March’s figure of 13.6 million.
The load factor (percent of seats occupied by passengers) in July remained unchanged year-on-year at 96%. The figure was higher than the load factor of 95% in June and May, 92% in April 2024 and 93% in March 2024.
Notably, RYAAY operated more than 110,500 flights in July 2024. This represents an improvement over 106,000 flights in June 2024, 105,000 flights in May 2024, 98,400 flights in April 2024 and 77,000 flights in March 2024. However, nearly 651 flights were cancelled due to air traffic control (ATC) delays.
Allegianta stock with a Zacks Rank of 3 (Hold), reported disappointing traffic numbers for July 2024.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Scheduled service (measured in passenger miles) decreased 1.7% from July 2023 levels. Capacity (measured in available seat miles) for scheduled service increased 2.4% year-on-year. As traffic did not decrease faster than capacity expansion, the load factor (percent of seats filled with passengers) decreased to 87.5% in July 2024 from 91.2% a year earlier.
The total number of departures (scheduled services) increased by 2.7% year-over-year in July 2024. In addition, the average route length (miles) increased by 0.3% year-over-year.
For the entire system (including scheduled service and fixed-fare contract), Allegiant carried 1.8% fewer passengers in July 2024 than in the previous year. Systemwide capacity increased 3.2% in July 2024 compared to the previous year.
