Delta stock and other airline stocks jumped on Wednesday after the carrier reported better-than-expected first-quarter results, aided by higher fares, and the carrier said it expected "very strong" summer demand, even amid concerns higher prices could dampen travel plans.
As travel rebounds from 2020's pandemic lows and inflation digs in, Delta said it hadn't yet seen any passenger resistance to its prices. But CEO Ed Bastian advised travelers who prioritize cheaper fares to "book early and be flexible."
During the carrier's conference call, Delta said it would remain "nimble" on how it manages flight schedules for the second half of the year, as Russia's invasion of Ukraine causes big swings in fuel prices. Management said they hadn't seen any impact on demand from the war so far.
And as some union members vent frustrations, the carrier said it felt good about its staffing levels, as more people, many sitting on savings, consider traveling again.
"Consumers have not been traveling over the last two years, so this is a category they're prioritizing" as they make plans, Bastian said on the call.
As inflation concerns weigh on markets, Delta President Glen Hauenstein said the carrier's premium-class seats have led the airline's recovery from 2020 lows, when the pandemic silenced the travel industry. He also expressed confidence that a shift toward those quality products was here to stay.
Delta Air Lines Earnings
Delta lost $1.23 a share, a bit less than Wall Street expected. Revenue jumped to $9.35 billion, also above estimates. Higher fares helped Delta offset soaring fuel costs.
Delta said domestic corporate-travel sales were around 70% recovered compared to 2019. Ninety percent of its corporate accounts expected travel volume to increase in the second quarter, as offices reopen. Domestic travel restrictions have been removed for top corporate accounts.
For the second quarter, Delta said it expected double-digit unit-revenue growth in compared 2019, before the pandemic slammed travel. It sees second-quarter capacity at 84% of 2019 levels.
Still, the backdrop for travel stocks still remains messy. Russia's war against Ukraine and China's coronavirus lockdowns have left the price of fuel and other commodities in flux. Delta said China's economy was unlikely to open in the weeks ahead.
Delta Stock, Airline Stocks
Delta stock jumped 6.2% to 41.02 in the stock market today, back above its 200-day line. Delta stock rose 1.1% to 38.62 on Tuesday, just reclaiming its 50-day line.
Shares have a Composite Rating of 27. Its EPS Rating is 9.
Among other airline stocks, American Airlines surged 10.6%, back above its 200-day as well after climbing 0.9% on Tuesday. All of the major airline stocks are trading well below highs notched in March and June last year.
American on Tuesday forecast higher-than-anticipated fuel costs for the first quarter. However, it said it expects a slight improvement in sales.
Elsewhere, United Airlines climbed 5.6% on Wednesday. Southwest ascended 7.5%.
Airline stocks head into earnings season after a wave of flight cancellations earlier in the year. Weather disruptions upended flight schedules. The omicron surge, as well, left many airline crew members sick. However, a rebound in March handed Delta a "solid profit" in March, the company said on its earnings call.
Oil prices spiked following Russia's invasion of Ukraine in February. Climate and supply-chain issues, meanwhile, have pushed the price of grains and other goods higher, which has filtered through into consumers' gas and grocery bills.
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'Demand Destruction' Concerns
The major U.S. airlines don't fly to Russia and have halted relationships with carriers there. But Cowen analyst Helane Becker, who follows airline stocks, said forward bookings would be worth watching this earnings season.
"Our concern in the near term is demand destruction as a result of high ticket prices caused by high jet fuel prices," she said in a research note this month. "So far, we haven't seen this, but that doesn't mean it isn't going to happen."
Hauenstein, during a conference last month, said passing on those costs would be "very achievable." And he said the target customer for lower-fare airlines was likelier to be hit harder by inflation than Delta's customers.
Some of Delta's lower-cost rivals are trying to get bigger. JetBlue is competing with Frontier to buy Spirit Airlines. Spirit last week said it would begin discussions with JetBlue. Analysts have said a deal could meet resistance from regulators.
Delta also faces frustrations from its pilots union, which has complained of being overworked. Hauenstein, in March, said Delta had been hiring 200 pilots per month and running them through training in an effort to bulk up on staffing.
