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Zacks analyst blog spotlights Spirit Airlines, Frontier Group Holdings, SkyWest Allegiant Travel and Gol Linhas

For immediate release

Chicago, IL – February 9, 2022 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Stocks recently featured in the blog include: Spirit Airlines SAVE, Frontier Group Holdings ULCC, SkyWest SKYW Allegiant Travel Co. ALGT and Gol Linhas GOL.

Here are the highlights from Tuesday’s analyst blog:

Airline Stock Roundup: Spirit/Frontier Merger and More

Last week, Spirit Airlines signed a definitive merger agreement with Frontier Group Holdings, the parent company of Frontier Airlines, to create America’s most competitive ultra-low-cost airline. Subject to customary closing conditions, the $2.9 billion transaction ($6.6 billion when assuming net debt and operating lease obligations are taken into account) is expected to close in the second half of the year. 2022.

As news about the deal between the two low-cost carriers grabbed headlines, SkyWest and Allegiant Travel Co. published their results for the fourth quarter of 2021. Brazilian carrier Gol Linhas was another newsmaker when it released its January traffic figures which were impressive due to the improving air travel demand scenario in the country.

Read the latest roundup of airline stocks here.

Summary of the latest Top Stories

1. Under the terms of the cash and stock agreement, Spirit Airlines shareholders will receive $25.83 per share, a premium of approximately 19% over the February 4 closing price. SAVE will own approximately 48.5% of the combined airline, while the remainder will be owned by ULCC. Upon closing, the deal will result in the formation of the fifth-largest airline in the United States. If the merger agreement goes through, $1 billion in savings for consumers is expected to be generated annually.

The combined entity is expected to generate annual revenue of approximately $5.3 billion (based on 2021 results). Once fully integrated, Frontier and Spirit Airlines, both currently ranked Zacks Rank #3 (Hold), are expected to generate annual operating synergies of $500 million.

The combined entity’s board will consist of 12 directors (including the CEO), seven of whom will be appointed by Frontier and five by Spirit. The chairman of the same board will be Mr. Franke, the chairman of Frontier Airlines.

You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. SkyWest’s fourth-quarter 2021 profit was 9 cents per share versus Zacks’ consensus estimate of an 8-cent loss. In the prior year quarter, SKYW posted a loss of 93 cents. Revenue of $777.2 million also topped Zacks’ consensus estimate of $720.1 million.

Revenue jumped 31.8% year-over-year, driven by a 30% increase in block hours (a measure of aircraft utilization) on completed flights. SKYW currently expects its blocked hours in 2022 to decrease by approximately 10-15% from its 2021 figures due to omicron-induced staffing issues.

3. Allegiant Travel Company reported fourth quarter 2021 earnings (excluding 59 cents of one-time items) of $1.18 per share, beating Zacks’ consensus estimate of $1.13. Sentiments regarding air travel demand are now bullish (due to increased vaccination programs) compared to the scenario in the prior year quarter when the company reported a loss of $1.12 per share.

Operating revenue of $496.9 million beat Zacks’ consensus estimate of $475.3 million and was up more than 100% year over year. In the first quarter of 2022, total operating revenue is expected to increase by 5 to 9.5% compared to the actual figures in the first quarter of 2019.

4. In January, Gol Linhas consolidated traffic grew 25.2% year-over-year. To cope with the increase in demand, GOL is expanding its capacity. During the same month, capacity increased by 26.2% year over year. GOL carried 27.3% more passengers last month compared to the previous year’s levels.

Sustained traffic in its home markets leads to the pink scenario on a consolidated basis. In January, domestic traffic and capacity improved by 21.5% and 22.2% respectively. On the home front, 25.6% more passengers boarded GOL flights in January 2022.

Performance

The following table shows the price development of the major airline players over the past week and over the past six months.

Almost all airline stocks have traded in the green over the past week. However, aside from the double-digit rise (14.7%) in Spirit Airlines stock following the announcement of the merger, other gains were moderate in nature. The NYSE ARCA Airline Index was nearly flat last week at $82.47. Over the past six months, the NYSE ARCA Airline Index has depreciated by 10.2%.

What’s next in airspace?

Fourth quarter earnings reports from select other carriers are expected in the coming days.

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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.

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Gol Linhas Aereas Inteligentes SA (GOL): Free Stock Analysis Report

Spirit Airlines, Inc. (SAVE): Free Inventory Analysis Report

Allegiant Travel Company (ALGT): Free Inventory Analysis Report

SkyWest, Inc. (SKYW): Free Stock Analysis Report

Frontier Group Holdings, Inc. (ULCC): Free Stock Analysis Report

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