Airlines have been struggling with staffing shortages, fewer flights, and longer wait times. Ted Rossman, the senior industry analyst at Bankrate, said, “This summer, air travel was particularly messy as consumers unleashed pent-up demand, and the industry couldn’t keep pace.”
On the other hand, the high inflation is making travelers shift their holiday getaway plans between Thanksgiving and New Year’s to travel shorter distances or drive instead of flying. Investors’ pessimism towards the airline industry is evident from the ETF Series Solutions - U.S. Global Jets ETF’s (JETS) 24.6% year-to-date decline.
Given the backdrop, we think investors should avoid buying fundamentally weak airline stocks JetBlue Airways Corporation (JBLU), Frontier Group Holdings, Inc. (ULCC), and Spirit Airlines, Inc. (SAVE), which continues to face immense turbulence.
JetBlue Airways Corporation (JBLU)
JBLU provides air passenger transportation services across the United States, the Caribbean, Latin America, Canada, and the United Kingdom.
On September 21, 2022, JetBlue Travel Products, a subsidiary of JBLU, announced the formation of Troupe, a free and collaborative group trip-planning app. However, the app might not garner enough traffic immediately.
JBLU’s operating loss came in at $113 million for the quarter that ended June 30, 2022, compared to an operating profit of $147 million in the year-ago period. Its net loss came in at $188 million, compared to a net profit of $64 million in the previous period. Also, its loss per share came in at $0.58, compared to an EPS of $0.20 in the prior year.
JBLU’s trailing-12-month gross profit margin of 19.57% is 33% lower than the industry average of 29.20%. Its trailing-12-month negative net income margin of 5.53% is lower than the industry average of 6.76%.
Analysts expect JBLU’s EPS to decrease 256.1% per annum for the next five years. Over the past year, the stock has lost 59.1% to close the last trading session at $6.67.
JBLU’s poor fundamentals are reflected in its POWR Ratings. The stock’s overall D rating indicates a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JBLU has a D grade for Momentum, Stability, and Sentiment. In the D-rated Airlines industry, it is ranked #23 out of 31 stocks. Click here for JBLU’s additional POWR Ratings for Value, Growth, and Quality.
Frontier Group Holdings, Inc. (ULCC)
ULCC is a low-fare airline company that provides air transportation for passengers. The company operates an airline that serves approximately 120 airports throughout the United States and international destinations in the Americas.
ULCC’s operating income came in at $7 million in the second quarter that ended June 30, down 61.1% year-over-year. Its net income came in at $13 million, down 31.6% year-over-year. Also, its EPS decreased 25% year-over-year to $0.06.
ULCC’s trailing-12-month gross profit margin of 3.60% is 87.7% lower than the industry average of 29.20%. Its trailing-12-month negative income margin of 5.01% is lower than the industry average of 6.76%.
Its EPS is expected to come in at negative $0.17 for the fiscal year ending December 2022.
Over the past year, the stock has lost 43.1% to close the last trading session at $9.25.
ULCC has an overall rating of D, equating to Sell in our POWR Ratings system. It has a D grade for Value and Momentum. It is ranked #26 in the Airlines industry. Click here for ULCC’s additional POWR Ratings for Growth, Stability, Sentiment, and Quality.
Spirit Airlines, Inc. (SAVE)
SAVE provides airline services. It covers approximately 85+ destinations across 16 countries in the United States, Latin America, and the Caribbean. It primarily focuses on value-conscious travelers.
On July 27, 2022, SAVE terminated its merger agreement with Frontier Group Holdings, Inc. (ULCC), the parent company of Frontier Airlines, Inc. This is a potential setback for the company’s future growth prospects.
SAVE’s operating loss came in at $45.33 million for the quarter that ended June 30, 2022, compared to an operating profit of $93.21 million in the previous period. The company’s current liabilities came in at $1.74 billion for the period ended June 30, 2022, compared to $1.28 billion for the period ended December 31, 2021.
Also, its total liabilities came in at $6.84 billion, compared to $6.43 billion for the same period.
SAVE’s trailing-12-month gross profit margin of 16.78% is 42.5% lower than the industry average of 29.20%. Its trailing-12-month negative net income margin of 7.53% is lower than the industry average of 6.76%.
The company’s EPS is expected to remain negative this year. Over the past year, the stock has lost 27.7% to close its last trading session at $19.65.
SAVE’s overall D rating equates to a Sell in our POWR Ratings system. It has a D grade for Stability, Growth, Momentum, Sentiment, and Quality. It is ranked #29 in the same industry. Click here to see more of SAVE’s component grades.
JBLU shares were trading at $6.70 per share on Friday afternoon, up $0.03 (+0.45%). Year-to-date, JBLU has declined -52.95%, versus a -23.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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