The first quarter of 2015 was a relatively successful quarter for stocks in the airline industry. This is due to higher demand for travel on the back of an improving labor market, consolidation and lower oil prices.
The bottom-line profitability of most of the airline stocks in the first quarter of 2015 benefited from low fuel costs, which accounted for a major portion of the airline’s operating expenses.
The decline in crude oil prices has significantly reduced operating expenses for airlines, which benefited bottom-line profitability. Lower jet fuel prices have been the hallmark of the airline industry, which hinted an inversely proportional relationship between crude oil prices and the investment value of airline stocks.
Moreover, the aviation overall performed well in the first quarter of 2015, thus, causing a certain amount of selected stocks to accelerate. These stocks have recorded better than expected quarterly earnings but are also witnessing strong earnings in 2015 as well.
Delta Air Lines (DAL, Financial) reported higher-than-expected earnings in the first quarter of 2015. The airline reported first quarter 2015 earnings of 45 cents per share. The beat is the nine consecutive quarter of earnings outperformance by the airline.
For the March quarter, the airline delivered a solid 5% top line growth and a 14.9% operating margin at market fuel prices. This is mainly due to strong domestic market and capacity discipline. Moreover, route expansion, cost control measures and customer-focused initiatives were the key factors.
Alaska Air Group (ALK, Financial), the parent company of Alaska Airlines, reported better-than-expected earnings in the first quarter of 2015 because of lower oil prices and solid traffic. The airline reported earnings of $1.12 per share. This was the seventh consecutive earnings beat reported by the airline.
Southwest Airlines Co (LUV, Financial) reported better-than-expected earnings and revenue in the first quarter of 2015. The airline reported earnings of 66 cents a share. The outperformance was the twelfth consecutive quarter of earnings beat by the airline. The quarterly revenue was inches up by 6.2% year over year to $4.4 billion.
Spirit Airlines Inc (SAVE, Financial) reported first-quarter 2015 earnings of 96 cents per share because of lower oil prices. This is the fourth consecutive quarterly earnings beat at the company. Earnings were up 87% from the last year at the same quarter. Furthermore, total operating revenue climbed 12.6% to $493.4 million on the back of higher flight volumes.
Allegiant Travel Company (ALGT, Financial) is the parent company of Allegiant Air, which performed well in the first quarter of 2015. The airline reported earnings of $3.74 per share. The earnings beat affected the stock positively. In the first quarter of 2015, revenue moved by 8.8% year over year to $329.2 million.
Volaris'Â (VLRS, Financial) results are likely to get better in 2015 as the airline takes full advantage of the recent decline in oil prices. The airline also plans to expand its international capacity to 33% to 36% this year to gauge strong demand in the U.S. while growing by 2% to 4% in Mexico. This would keep total unit revenue to rise at a healthy pace.
Air Lease (AL, Financial) has a noticeable twist on its business strategy when compared to other air leasing companies. At the moment, the airline’s global fleet would contain roughly 200 aircraft rather than growing with abandon. Moreover, as new aircraft are acquired, the older aircraft would be continually sold in order to maintain the youngest stable of planes in the world. Also, the strategy keeps the high levels of debt necessary for playing in the airline industry relatively stable. The airline would do well in 2015.
On a whole, as said earlier, most airlines are taking advantage of low fuel prices while working diligently to attract more customers. With profits booming in the industry at this time, it is everyone’s expectation that the airline stocks will continue to improve into 2016 and maybe beyond.
