Amid solid leisure travel demand, most airline operators are witnessing a severe pilot shortage, adversely affecting the industry's recovery. When the COVID-19 pandemic started, airlines started giving older pilots buyout packages, which led to retirements outpacing new hires.
Investors’ pessimism surrounding the airline space is evident from the U.S. Global Jets ETF’s (JETS) 16.3% loss over the past month.
Moreover, limited personnel availability in other aspects of airline operations has led to delays and flight cancellations. Furthermore, employees getting sick with COVID-19 continues to lead to temporary shortages.
Given this backdrop, fundamentally weak airline stocks, Southwest Airlines Co. (LUV) and Delta Air Lines, Inc. (DAL), could plunge further. So, these stocks are best avoided now.
Southwest Airlines Co. (LUV)
LUV operates as a passenger airline company that provide scheduled air transportation services in the United States and near-international markets. The company operates a total fleet of 728 Boeing 737 aircrafts; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries.
Compared with the first quarter of 2019, LUV’s operating revenues decreased 8.8% year-over-year to $4.69 billion for the fiscal first quarter that ended March 31, 2022.
The company’s adjusted net loss came in at $191 million, compared to an income of $387 million in the prior-year period. Also, its adjusted loss per share came in at $0.32, compared to an EPS of $0.70 in the year-ago period.
Analysts expect LUV’s EPS to decline at a rate of 21% per annum over the next five years. The stock has lost 18.2% over the past month to close the last trading session at $36.72.
LUV’s poor prospects are apparent in its POWR Ratings also. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a D grade for Stability. Click here to see the additional POWR ratings for LUV (Sentiment, Growth, Momentum, Value, and Quality). It is ranked #3 out of 31 stocks in the F-rated Airlines industry.
Delta Air Lines, Inc. (DAL)
DAL provides scheduled air transportation for passengers and cargo internationally. The company operates through two segments, Airline and Refinery. The company operates through a fleet of approximately 1,200 aircraft.
It also provides aircraft maintenance and engineering support, repair and overhaul services, vacation packages to third-party consumers, aircraft charters, and management and programs.
Compared with the first quarter of 2019, DAL’s adjusted operating revenues decreased 21% year-over-year to $8.16 billion for the fiscal first quarter that ended March 31, 2022.
The company’s free cash flow declined 74% year-over-year to $197 million, while its adjusted net loss came in at $784 million, compared to an income of $639 million in the prior-year period. Also, its adjusted loss per share came in at $1.23, compared to an EPS of $0.96 in the year-ago period.
Analysts expect DAL’s EPS to decline at a rate of 23.7% per annum over the next five years. The stock has lost 24.7% over the past month to close the last trading session at $29.91.
DAL’s POWR Ratings are consistent with this bleak outlook. In addition, the stock has a D grade for Stability.
Click here to see DAL’s ratings for Value, Momentum, Quality, Growth, and Sentiment. In addition, DAL is ranked #10 in the same industry.
LUV shares were trading at $36.91 per share on Friday morning, up $0.19 (+0.52%). Year-to-date, LUV has declined -13.84%, versus a -17.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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