Are we there yet?Like a kid on the way to a beach house, airline investors are incessantly asking “are we there yet” as they see the skyline of pre-covid capacity on the horizon.
- Delta earnings proved to everyone that travel is still on the rebound despite the inflationary environment and a rocky start to the summer travel season, punctuated with canceled flights and multiple disruptions. A positive forecast managed to outweigh a marginal miss that saw the airline report EPS of $1.51 on record revenues of $12.84bn.
- The airline says its capacity will reach 92% of pre-covid levels by Q4 and expects to reach a full recovery by summer 2023, saying that “demand has not come close to being quenched by a hectic summer travel season”. That demand, together with higher ticket prices, is what’s helped airlines conquer soaring fuel and labor costs this quarter.
- Travel continues to be a bright spot in a dark economic environment. American Airlines last week issued a bright forecast and said revenue for the quarter will be up 13% from the same period of 2019, when it brought in $11.91bn. Airlines have a unique level of pricing power and looks like people are too keen to travel to care – all the better for investors.
Delta Air Lines / Flickr
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Turbulent SkiesDelta’s earnings were kinda similar to a flight that leaves on time but forgets your luggage.
- Delta shares fell nearly 5% on Wednesday to continue trading near two-year lows. The company managed to beat on the top end, with revenues of $13.82bn, but missed earnings estimates at $1.44 per share, proving that the company itself has had just as bad a time as its passengers recently.
- On the bright side, travel demand has remained robust. Maybe too robust. Delta, along with the rest of the airline industry, has been plagued by severe staffing shortages, thousands of canceled flights, lost luggage, and bad weather, leading to a “rough six weeks” as CEO Ed Bastian put it.
- Prices fell when investors saw the path ahead tho. Despite Delta managing a profit thanks to consumers that are willing to pay higher prices, the brand warned that cost pressures and higher fuel prices will make a mark on the balance sheet and it’ll have to pull back its flying capacity for the summer. As the first major airline to report this szn, it doesn’t look good for others.
Ryan Johns / Unsplash
Love at first flightAirline stocks have been flying all over the place this quarter, but Delta earnings indicate that it could soon be time to take off the oxygen mask and enjoy the clear skies.
- Delta shares jumped 6.2% on Wednesday to their highest level since late Feb after handing out mixed earnings, reporting a narrower than expected loss of $1.23 per share on revenues of $9.35bn, which is still off 2019 levels by about 11%.
- Airlines are experiencing the strongest travel demand in over three years, helping to offset rising fuel and commodity prices. Delta logged its highest bookings ever in March this year, and plans to ramp up its schedule this quarter to fly at 84% of its 2019 capacity.
- Flights aren’t the only thing set to take off this summer. Delta has said it expects the current quarter to turn profitable, saying revenues should come in at around 97% of pre-pandemic levels – that’s a better recovery than people were hoping for, and the bullishness sent other airlines stocks soaring on Wednesday too.
A move in the flight directionThank goodness for all the travelers out there with itchy feet who are determined to make up for lost time after covid, bc they’re sending airline stocks soaring.
🔍 Key points:
- Airline stocks took off on Tuesday. Delta airlines gained 8.7%, United Airlines was up over 9%, Southwest gained 5% and American Airlines jumped nearly 10% – and all of them are continuing their gains into Wednesday morning trading.
- Several of the highest flyers hiked their quarterly outlooks as they catch up to pre-pandemic levels. Delta now expects to finish Q1 with revenue at 78% of 2019 levels, United expects up to 80% of 2019 levels, and Southwest expects to reach up to 91% of pre-covid revenue.
- It's thanks to “unparalleled” demand and confidence that oil prices will fall. Adobe estimates that customers spent over $6.6bn on airline tickets on carrier websites in Feb, the first time since covid that both bookings and sales have topped 2019 numbers, and execs are confident that the industry can “recapture over 100% of the fuel price run-up” as oil loses its $100 price tag.
Matteo Raw / Unsplash
Delta dodges OmicronDelta narrowly avoids turbulence from Omicron and gets carried higher by a strong gust of Q4 earnings.
- Prices hit a nearly two-month high on Thursday, jumping just under 3% in intraday trading after spending most of this year trading flat thanks to a wave of cancellations.
- It beat on both ends, reporting EPS of $0.22 on revenues of $9.47bn, compared to expectations of $0.14 in EPS on $9.21bn in revenues.
- It shrugged off cancellation headwinds. U.S. airlines have cancelled over 30k flights since Christmas Eve after crew members were kept home by covid.
- “The worst is behind us” says CEO Ed Bastian about the covid cancellations, with plans in the works to hire up to 5k new employees to avoid a repeat.
- Execs are betting on a strong return for corporate travel in the spring and summer quarters as Omicron fully backs off, though they also warned there may be a few more losses before then.
- It’s a positive sign for the rest of the airline industry. Investors expected stocks to be grounded by the new strain after getting hit particularly hard by the pandemic – but over all horizons there’s hope.
Illustration by TradingView
Lift-off to Buy ratingDelta Airlines flies on its Buy rating, dumping the weight of cancelled flights to help with takeoff.
- Delta took off 3.5% on Friday to its highest price since mid-November. Other airlines jumped on board – American Airlines (AAL), United Airlines (UAL) and Southwest (LUV) all saw similar gains.
- Bank of America was behind the boost, highlighting Delta as a favorite in an airline industry that it thinks is set to make a strong rebound in 2022 thanks to corporate travel and declining Covid concerns.
- The good news outshone a flurry of flight cancellations, which continued into the weekend with over 5k flights cancelled because of bad weather and Covid.
Illustration by TradingView
Airline stocks are struggling to take offDelta reported a third quarter profit thanks to increased demand for travel, but a warning that rising fuel prices will squeeze fourth-quarter profits sends the stock down 5.76% to a monthly low.
Delta Airlines reported adjusted earnings per share of $0.30 on revenues of $9.15 billion in the third quarter, compared to expectations of $0.17 in earnings per share on $8.4 billion in revenues. Whilst the numbers topped forecasts on both the top and bottom lines, the airline company did issue a warning regarding the rest of the year. Fuel prices continue to rise around the world, already up around $2.25 compared to the normal third quarter average of $1.97, and Delta is expecting to feel the pain in the fourth quarter and see a decrease in its bottom line despite an increase in travel. Ed Bastian, Delta’s chief executive officer, said:
Our September quarter marked an important milestone in our recovery, with our first quarterly profit since the start of the pandemic. Our revenues reached two-thirds of 2019 levels thanks to the industry-leading operational performance our people delivered through a busy summer, once again showing why they are the best in the business.
Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors, weighed in:
Holiday travel is an important litmus test right now. The pandemic has actually been featuring a lot of road travel, car trips, road trips, but we haven’t seen the really robust return to plane travel yet. All of those actually set up for the potential for holiday travel come Christmas time so we have to see how that actually pans out, and that will be a make-or-break moment for the airline stocks.
Delta ended Wednesday 5.76% at $41.03, its lowest closing price since September 21.
Delta Air Lines
Delta earningsDelta Airlines releases its Q1 2021 earnings, with prices tumbling 2.80% as it reports yet another quarterly loss.
Delta reported a net loss of $1.19 billion on $4.15 billion in revenue for the first quarter of the year, down over 60% compared to the $10.47 billion the company generated in the same quarter last year. On an adjusted basis, the airline posted a net loss of $3.55 a share compared to the forecasted $3.17 per share, and adjusted operating revenue was down 65% compared to the same quarter the year before at $3.6 billion.
Delta, along with the rest of the travel industry, took a pretty big hit during the pandemic. In 2020, Delta reported its biggest net loss in its history at $12.4 billion as COVID devastated the industry, while operating revenues fell by almost two thirds (64%).
However, things are looking up, and the company now expects to break even in June as travel demand rebounds. Airlines have seen a resurgence in bookings as more people around the world are vaccinated and keen to get travelling. For the month of March, passenger revenue was up 50% from February and according to Delta, leisure bookings have recovered over 85% of 2019 levels. The carrier will also lift its policy of banning use of the middle seat, which has taken up a third of its potential bookings revenue. But Q2 revenue is still likely to be around 50-55% lower than the same period in 2019, while costs could be up nearly 10%.
A year after the onset of the pandemic, travelers are gaining confidence and beginning to reclaim their lives
said Ed Bastian, Delta’s CEO.
Thanks to the incredible efforts of our people, we achieved positive daily cash generation in the month of March, a remarkable accomplishment considering our middle seat block and the low level of demand for business and international travel. If recovery trends hold, we expect positive cash generation for the June quarter and see a path to return to profitability in the September quarter as the demand recovery progresses