US airline stocks fly as carriers raise revenue forecast

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Shares of United Airlines soared in premarket trading on Tuesday.

Frederic J. Brown/AFP via Getty Images

U.S. airline stocks soared early Tuesday as a number of the nation’s largest carriers raised revenue forecasts on stronger demand and oil prices continued to fall.

Delta Airlines

(symbol: DAL) said it now expects March quarter revenue to recover to 78% of 2019 levels, down from a previous forecast of between 72% and 76% released in January. It also expects total revenue per available seat mile to be flat compared to March 2019, in a forecast update ahead of the

JP Morgan

industrial conference in New York.

United Airlines

(UAL) also provided an update to its forecast ahead of the conference, now seeing its first-quarter 2022 revenue “close to the better end” of its range 20% to 25% below first-quarter levels. 2019.

South West Airlines

(LUV) said first-quarter revenue would be down 8% to 10% from the same period in 2019, an improvement from previous guidance for a decline of 10% to 15%. Southwest said revenue trends improved in March after mildness from the Omicron variant of the coronavirus in January and February. The carrier expects a net loss in the first quarter, but said March would be “solidly profitable” due to improved revenue and fuel hedging gains.

American airlines

(AAL) said it expects revenue to be 17% lower than in the first quarter of 2019, up from its previous forecast of a 20% to 22% decline. But the carrier warned it had no outstanding contracts to cover its fuel consumption, adding that it was “fully exposed” to fluctuations in fuel prices.

However, oil prices continued to tumble on Tuesday, with West Texas Intermediate futures falling 8% to below $95 a barrel, after hitting nearly $125 at one point last week. Falling oil prices and revisions to earnings forecasts caused airline stocks to soar in early trading.

United and Delta shares both climbed nearly 8% in early trading, while American rose 7% and Southwest rose 6%.

Delta said its pretax loss in the quarter would still be in line with its original expectations, despite rising fuel prices. Expected adjusted fuel prices were raised to $2.80 per gallon from the earlier forecast of $2.35 to $2.50. He expects “solid” pre-tax profit for March as stronger revenue offsets higher fuel costs.

The airline also reported strong spring and summer travel demand in its updated March quarter outlook, expecting positive free cash flow in March.

“Delta is well positioned to recoup higher fuel prices given the disciplined approach to capacity, strong brand credentials and focus on premium products,” according to a presentation due to be released. be presented at the conference on Tuesday.

In January, Delta CEO Ed Bastian said losses were expected through January and February, but return to profitability was expected in March, with Omicron delaying demand recovery by 60 days.

United also raised its fuel price estimate to $2.99 ​​per gallon from $2.51 per gallon in January. The carrier cut its capacity forecast to a 19% drop from 2019 levels, down from an earlier range of 16% to 18% lower. Full-year capacity for 2022 will be down a high single-digit percentage from 2019, he said, after previously forecasting it would be lower in January.

But United noted that the travel recovery is accelerating, reporting “very strong” leisure demand and the highest business travel traffic since the start of the pandemic, reaching 70% of 2019 levels through present in March.

Write to Callum Keown at [email protected]

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