Due to the persistent economic and geopolitical headwinds and the possibility of a recession, investors have decreased their exposure to sectors with dim near-term prospects, resulting in significant losses for airlines lately. Despite a rebound in travel demand, the industry has been negatively impacted by high inflation, rising fuel prices, and staffing shortages.
According to FlightAware, more than 3,600 flights were delayed within, into, or out of the United States ahead of the Labor Day holiday, with 145 cancellations. In addition to operational challenges, declining consumer demand amid the rising odds of a recession has also hurt airline stocks.
Given this backdrop, airline stocks JetBlue Airways Corporation (JBLU), Spirit Airlines, Inc. (SAVE), and Hawaiian Holdings, Inc. (HA) have declined lately. Therefore, it may be wise to avoid these fundamentally weak stocks.
JetBlue Airways Corporation (JBLU)
JBLU is a travel company providing air transportation services across the United States, the Caribbean, Latin America, Canada, and the United Kingdom. Additionally, the company has a strategic partnership with American Airlines Group, Inc. (AAL) to create connectivity for travelers in the North East.
During the second quarter ended June 30, 2022, JBLU’s revenue increased 63.1% year-over-year to $2.45 billion. However, its operating loss came in at $113 million, compared to an operating income of $147 million in the prior-year quarter. The company reported a net loss of $188 million, compared to a net income of $64 million in the second quarter of 2021. Its loss per share amounted to $0.58.
Analysts expect its EPS to decline 256.1% per annum over the next five years. The stock has declined 12.7% over the past month.
JBLU's POWR Ratings are consistent with this bleak outlook. The stock's overall D rating translates to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
JBLU has an F grade for Sentiment and a D for Stability. Within the D-rated Airlines industry, it is ranked #24 of 31 stocks. Click here to see additional POWR Ratings for Growth, Value, Quality, and Momentum for JBLU.
Spirit Airlines, Inc. (SAVE)
SAVE is a commercial airline providing air transportation services to its customers. It connects 85 cities in 16 countries across the United States, Latin America, and the Caribbean. The company had a fleet of 173 Airbus single-aisle aircraft as of December 31, 2021.
SAVE’s total revenue increased 34.9% year-over-year to $1.4 billion for the second quarter ended June 30, 2022. However, its operating loss came in at $45.33 million, compared to an operating income of $93.21 million in the second quarter of 2021. The company reported a net loss of $52.41 million, while its loss per share amounted to $0.48.
Its EPS is expected to remain negative in the current fiscal year. The stock has declined 6.4% over the past month.
SAVE's weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our POWR Ratings system. The stock has a D grade for Growth, Stability, and Quality. In the Airlines industry, it is ranked #28.
In addition to the POWR Ratings grades I have just highlighted, you can see the SAVE rating for Value, Stability, and Sentiment here.
Hawaiian Holdings, Inc. (HA)
HA operates scheduled passenger and cargo flights through its subsidiary, Hawaiian Airlines, Inc. The company's fleet consists of 19 Boeing 717-200 aircraft for Neighbor Island routes and 24 Airbus A330-200 aircraft, and 18 Airbus A321neo aircraft for North America and International routes.
HA's total revenue increased 68.4% year-over-year to $617.43 million for the second quarter ended June 30, 2022. The company reported an operating loss of $26.08 million, compared to an operating profit of $18.48 million in the prior-year quarter. Its net loss grew 495.3% from the prior-year quarter to $36.77million. Its loss per share came in at $0.72.
Street expects HA's EPS to decline 119.7% per annum over the next five years. The stock has declined 6.7% over the past month.
HA’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.
It also has a D grade for Stability and Sentiment. HA is ranked #23 in the same industry. Click here to see the additional POWR Ratings for HA (Growth, Value, Momentum, and Quality).
JBLU shares were trading at $8.08 per share on Thursday morning, up $0.10 (+1.25%). Year-to-date, JBLU has declined -43.26%, versus a -16.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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