Allegiant (NASDAQ:ALGT) announces an agreement with ALAFCO Aviation Lease and Finance Company to lease 13 Airbus A320 aircraft.
The company says the agreement is another important step towards a planned transition to an all-Airbus fleet by 2019.
"The fleet transition will not only bring the benefit of operating efficiencies in training, scheduling, maintenance and more, but will also mean key economic advantages through greater fuel efficiency and higher seat capacity," notes CEO Maurice Gallagher.
The transaction brings Allegiant to a total of 92 Airbus aircraft either in service or committed for future delivery.
Tune into the live stream on Yahoo Finance, and come back here to discuss.
Warren Buffett and Charlie Munger start their Q&A at around 10:30 a.m. ET.
The company reported earnings last night, with Q1 operating EPS of $2,163 vs $2,274 in the same quarter a year ago.
Stay tuned for updates throughout the day.
Asked about whether Berkshire's structure might allow for a Wells Fargo-like sales scandal, Buffett points to a company hotline that gets 4,000 calls a year ("most of them are frivolous ... Anything that looks serious I will hear about") and suggests that it would be hard for things to get where they were with Wells Fargo (NYSE:WFC) without the CEO knowing, "and the CEO has to act ... It was a huge, huge, huge error if they were getting some communications and they ignored them or sent them down.”
Self-driving vehicles present a real threat to Berkshire's insurance and rail businesses, Buffett says. "Driverless trucks are a lot more of a threat than an opportunity to the Burlington Northern," he says. "And if driverless cars became pervasive, it would only be because they were safer ... and that would mean that the overall economic cost of auto-related losses had gone down, and that would drive down the premium income of Geico."
Asked about the unloading of a third of Berkshire's stake in IBM while continuing to build up in Apple (NASDAQ:AAPL), Buffett says “I regard them as being quite different businesses. They are two different types of decisions and I was wrong on the first one. And we’ll find out whether I was right or wrong on the second. I do not regard them as apples and apples. I don’t regard them as apples and oranges." On missed opportunities, "we failed you" by not figuring out Google (GOOG, GOOGL) sooner, and "we blew Wal-Mart (NYSE:WMT) too," Charlie Munger says.
"China has a bright future" despite growing pains, Munger says, and China's market is a lot cheaper than in the U.S. Buffett has nothing to add: Munger "gave the headline, China's stock market will outperform the U.S.," and he breaks the meeting for lunch, to reconvene at 2:15 p.m. ET.
Airlines (DAL, UAL, LUV, AAL, SKYW, HA, ALK, JBLU, ALGT, JETS) are also a topic of discussion by Buffett and Munger, which isn't a shocker considering that Berkshire (BRK.A, BRK.B) now has over $10B invested in the sector.
Buffett: "It's a fiercely competitive industry. The question is if it's a suicidally competitive industry. It has been operating at 80 percent or better of capacity for some time ... it's fair to say they will operate at higher degrees of capacity over the next 5 or 10 years than at historical rates. They actually at present are earning quite high returns on invested capital, I think higher than FedEx (NYSE:FDX) or UPS (NYSE:UPS)."
"It is no cinch that the industry will have more pricing sensibility in the next 10 years, but the conditions have improved for that," he observes.
A decision by American Airlines Group (AAL -6.9%) to raise wages is creating a ripple of worry in the airline sector.
JPMorgan lowers its rating on AAL to Neutral from Overweight amid a shift in mindset on its bullish view of the sector.
'We do feel as if the first credible blow to our thesis can potentially be made by naysayers and skeptics. Establishing a precedent that labor contracts are seemingly temporary in nature, and subject to change at the request of one party, represents a potential step back in regards to what we felt was an increasingly time-tested thesis," explains analyst Jamie Baker.
"Hopefully, this serves merely as a glance instead of a true body blow for the sector, one that in coming years we will not look back on with the same level of clarity as the numerous positive events we’ve witnessed over the last several years," he adds.
Cowen and Raymond James also say they were caught off-guard by American's pay hike.
Sector movers: United Continental (UAL -3%), Delta Air Lines (DAL -2.7%), Spirit Airlines (SAVE -1.7%), Alaska Air Group (ALK -4.4%), Allegiant Travel (ALGT -2.7%) and Southwest Airlines (LUV -3.2%), which also reported earnings today.
Deutsche Bank downgrades Allegiant Travel (ALGT -8.3%) to a Hold rating after having the airline stock set at Buy.
Bank of America Merrill Lynch drops Allegiant to Neutral from Buy and also lowers its price target to $175 from $205.
The loss in confidence follows a Q1 bottom line miss from Allegiant amid higher costs (CASM +12% ex-fuel). The company's load factor fell 380 bps to 80.2% during the quarter. For the full year, Allegiant expects capacity growth of 8% to 11%.
JetBlue (NASDAQ:JBLU) is higher after knocking out a Q1 profit beat.
Key metrics for Q1: Revenue passenger miles +3.9%, capacity +4.2%, load factor -30 bps to 83.9%, passenger revenue per available seat mile -5.8%, yield per passenger mile -5.5%, operating expenses per available seat mile +10% (+3.3% ex-fuel), realized fuel price +44% Y/Y to $1.69.
The airline sees Q2 capacity growth of 4% to 6% and a Q2 passenger revenue per available seat mile increase of 3% to 6%.
The better-than-anticipated PRASM guidance from JetBlue appears to be giving a little lift to SkyWest (NASDAQ:SKYW), Southwest Airlines (NYSE:LUV) and Allegiant Travel (NASDAQ:ALGT) in early trading.