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