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Category: Southwest Airlines (LUV), Delta Airlines (DAL) and United Airlines (UAL)
Date: 30 June 2020 Stock price of Southwest Airlines: $35.04 Stock price of Delta Airlines: $28.61 Stock price of United Airlines: $35.27 In this article we have a battle of the airlines in what we call an airline fly off. We compare Southwest Airlines (LUV) to Delta Airlines (DAL) and United Airlines (UAL). Which of these airlines stock has been the best performer and most likely to outperform considering their latest earnings reports?
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Does United Airlines offer the most value as its stock has fallen furher than Delta and Southwest over the last 3 years?"
About Southwest Airlines
In its 49th year of service, Dallas-based Southwest Airlines Co. (NYSE: LUV) continues to differentiate itself from other air carriers with exemplary Customer Service delivered by more than 60,000 Employees to a Customer base topping 130 million passengers annually. Southwest became the nation’s largest domestic air carrier in 2003 and maintains that ranking based on the U.S. Department of Transportation’s most recent reporting of domestic originating passengers boarded. In peak travel seasons, Southwest operates more than 4,000 weekday departures among a network of 101 destinations in the United States and 10 additional countries.
Southwest coined Transfarency® to describe its purposed philosophy of treating Customers honestly and fairly, and low fares actually staying low. Southwest is the only major U.S. airline to offer bags fly free® to everyone (first and second checked pieces of luggage, size and weight limits apply, some carriers offer free checked bags on select routes or in qualified circumstances), and there are no change fees, though fare differences might apply.
Southwest is committed to returning value to its Shareholders. Since 2010, Southwest has returned more than $11.7 billion to Shareholders through share repurchases and dividends, through September 30, 2019. In the first nine months of 2019, Southwest returned $1.8 billion to Shareholders through the repurchase of $1.45 billion in common stock and the payment of $372 million in dividends.
Quick facts about Southwest Airlines
Southwest coined Transfarency® to describe its purposed philosophy of treating Customers honestly and fairly, and low fares actually staying low. Southwest is the only major U.S. airline to offer bags fly free® to everyone (first and second checked pieces of luggage, size and weight limits apply, some carriers offer free checked bags on select routes or in qualified circumstances), and there are no change fees, though fare differences might apply.
Southwest is committed to returning value to its Shareholders. Since 2010, Southwest has returned more than $11.7 billion to Shareholders through share repurchases and dividends, through September 30, 2019. In the first nine months of 2019, Southwest returned $1.8 billion to Shareholders through the repurchase of $1.45 billion in common stock and the payment of $372 million in dividends.
Quick facts about Southwest Airlines
- Revenues: $4.234 billion (down from $5.149 billion for the same period of the previous year)
- Revenues decreased by-17.8% over the last 12 months
- Net loss: -$94 million (down from $387 million from for the same period of the previous year)
- Diluted loss per share: -$0.18 (down from $0.70 for the same period of the previous year)
- Diluted weighted-average shares outstanding: 515 million (down from 552 million for the same period of the previous year)
- Cash and cash equivalents: $3.940 billion
- Cash and cash equivalents per share: $7.65
- Cash and cash equivalents makes up 21.3% of Southwest Airlines market capital
- Cash and cash equivalents makes up 14.7% of Southwest Airlines total assets
- Stockholders equity in Southwest Airlines: $9.075 billion
- Stockholders equity per Southwest Airlines share: $17.62
- Southwest Airlines is trading at 1.98 times its stockholders equity per share which is just within the expected range of between 2 and 4 that most firms tend to trade at
About Delta Airlines
Delta Air Lines (NYSE: DAL) is the U.S. global airline leader in products, services, innovation, reliability and customer experience. Powered by its 80,000 people around the world, Delta continues to invest in its people, improving the air travel experience and generating industry-leading shareholder returns. Headquartered in Atlanta, Delta offers more than 5,000 daily departures and as many as 15,000 affiliated departures including the premier SkyTeam alliance, of which Delta is a founding member. Delta serves nearly 200 million people every year, taking customers across its industry-leading global network to more than 300 destinations in over 50 countries.
Quick facts about Delta Airlines (DAL)
Quick facts about Delta Airlines (DAL)
- Revenue: $8.592 billion (down from $9.254 billion for the same quarter of the previous year)
- Revenue decreased by -18% over the last 12 months
- Net loss: -$534 million (down from $730 million for the same quarter of the previous year)
- Diluted loss per share: -$0.84 (down from $1.09 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 637 million (down from 667 million for the same quarter of the previous year)
- Cash and cash equivalents: $5.967 billion
- Cash and cash equivalents per share: $9.36
- Cash and cash equivalents makes up 26.5% of Delta Airlines' market capital
- Cash and cash equivalents makes up 8.7% of Delta Airlines' total assets
- Stockholders equity of Delta Airlines' : $14.304 billion
- Stockholders equity per share: $22.45
- So Delta Airlines is trading at 1.27 times its stockholders equity per share. This is outside the expected range of between 2 and 4 most firms tend to trade at
More About United Airlines (UAL)
United's shared purpose is "Connecting People. Uniting the World." We are more focused than ever on our commitment to customers through a series of innovations and improvements designed to help build a great experience: Every customer. Every flight. Every day. Together, United Airlines and United Express operate approximately 4,900 flights a day to 358 airports across five continents. In 2018, United and United Express operated more than 1.7 million flights carrying more than 158 million customers. United is proud to have the world's most comprehensive route network, including U.S. mainland hubs in Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. United operates 788 mainline aircraft and the airline's United Express carriers operate 560 regional aircraft. United is a founding member of Star Alliance, which provides service to 195 countries via 26 member airlines. For more information, visit united.com, follow @United on Twitter and Instagram or connect on Facebook. The common stock of United's parent, United Airlines Holdings, Inc., is traded on the Nasdaq under the symbol "UAL"
Quick facts about United Airlines
Quick facts about United Airlines
- Revenue: $7.979 billion (up from $9.589 billion for the same quarter of the previous year)
- Revenue decreased by -16.8% over the last 12 months
- Net loss: -$2.11 billion (down from $292 million for the same quarter of the previous year)
- Diluted loss per share: -$6.86 (down from $1.09 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 248.5 million (down from 268.3 million for the same quarter of the previous year)
- Cash and cash equivalents: $3.44 billion
- Cash and cash equivalents per share: $13.84
- Cash and cash equivalents makes up 33.8% of United Airlines' market capital
- Cash and cash equivalents makes up 6.5% of United Airlines' total assets
- Stockholders equity of United Airlines' : $9.418 billion
- Stockholders equity per share: $37.90
- Price to stockholders equity: 0.93
- So United Airlines is trading at 0.93 times its stockholders equity per share. This is just outside the expected range of between 2 and 4 most firms tend to trade at
Stock price history of Southwest (LUV), Delta (DAL) and United (UAL) over last 3 years
The image below shows the stock price history of Southwest Airlines (LUV), Delta Airlines (DAL) and United Airlines (UAL) over the last 3 years. And as it shows its been a very volatile time for the airline companies stockholders. Over the 3 year period the various airline stocks provided the following returns.
- Southwest Airlines (LUV) : -43.61%
- Delta Airlines (DAL): -47.64%
- United Airlines (UAL): -55.79%
So which airline comes out on top?
So if one had to buy one of these airlines stock right now, which one would it be? Does United Airlines offer the most value as its stock has fallen furher than Delta and Southwest over the last 3 years? Or is there an underlying reason why United has underperformed compared to Southwest and Delta? One of our first comparison metrics is the Price to stockholders equity per share ratio. What is the stockholders equity per share? Well if a firm decides to sell all their assets, pay all liabilities and distribute the rest to stockholders that is stockholder equity per share. So expressing that as a ratio to the price one gets a feel of how over/undervalued a stock is. Below the Price to Stockholder Equity per share ratio of the three airlines:
So Southwest Airlines is trading at almost double their stockholders equity per share, Delta about 30% above their stockholders equity per share and United Airlines 7% below their stockholders equity per share. So based on this one would say that United is the cheapest and Southwest the most expensive. Looking at price to earnings ratios wont help much now as they are all current loss making and not generating any earnings to calculate a price to earnings ratio. Cash on the balance sheet is another indication of value and how easily the company can ride out the current tough business environment.
Looking at the cash per share and the percentage it makes up of its current stock price
So again United Airlines comes out on top when looking at the cash per share expressed as a percentage of their stock price. While Southwest has far less cash per share on their balance sheet compared to the other two airlines it is a far smaller airline with a daily cash burn rate that is a lot lower than the two larger airlines. So from a balance sheet perspective they are far better placed to deal with the impact of the Covid-19 pandemic on the air travel industry. And Southwest is far more nibble due to their size to change their operations and business strategy due to the Covid-19 pandemic and its for these reasons we pick Southwest Airlines (LUV) as our Winner in the airline fly off battle
- Southwest Airlines: 1.98
- Delta Airlines: 1.27
- United Airlines: 0.93
So Southwest Airlines is trading at almost double their stockholders equity per share, Delta about 30% above their stockholders equity per share and United Airlines 7% below their stockholders equity per share. So based on this one would say that United is the cheapest and Southwest the most expensive. Looking at price to earnings ratios wont help much now as they are all current loss making and not generating any earnings to calculate a price to earnings ratio. Cash on the balance sheet is another indication of value and how easily the company can ride out the current tough business environment.
Looking at the cash per share and the percentage it makes up of its current stock price
- Southwest Airlines: $7.65 (21.8%)
- Delta Airlines: $9.36 (32.7%)
- United Airlines: $13.84 (39.2%)
So again United Airlines comes out on top when looking at the cash per share expressed as a percentage of their stock price. While Southwest has far less cash per share on their balance sheet compared to the other two airlines it is a far smaller airline with a daily cash burn rate that is a lot lower than the two larger airlines. So from a balance sheet perspective they are far better placed to deal with the impact of the Covid-19 pandemic on the air travel industry. And Southwest is far more nibble due to their size to change their operations and business strategy due to the Covid-19 pandemic and its for these reasons we pick Southwest Airlines (LUV) as our Winner in the airline fly off battle