The sector’s earnings season got off to a strong start last week when Delta Air Lines (Delta Stock) issued an optimistic outlook as business, and international travel flared back to life in the third quarter.
This week’s reportable carriers include American Airlines (AAL) and United Airlines (UAL) as investors wait to see how much the leading companies in the sector are feeling the patterns observed by Delta (NYSE:DAL). If they are experiencing the same trends, the pair will probably gain more than other carriers.
Last week, Delta was the first significant airline to release third-quarter numbers. Although the earnings barely beat expectations, that wasn’t the main point. In light of favorable business and international travel trends, the airline’s fourth-quarter projection exceeded expectations, boosting investors and igniting a rare wave of confidence throughout the industry.
Data from the Transportation Security Administration indicated that 2.495 million persons went through U.S. airport checkpoints on Sunday, the highest day since February 11, 2020, and the favorable mood persisted on Monday.
After Labor Day on September 4, according to Delta, business reservations increased, reaching 80% of 2019 levels by the quarter’s conclusion. According to Delta President Glen William Hauenstein, corporate sales have doubled since Labor Day in less recovered industries, including banking, consulting, and consumer services. The business has “increasing confidence” that business travel will rebound completely.
Another market lagging after Covid, trans-Atlantic demand, has improved because of popular tourist destinations like Italy, Spain, and Greece. International unit sales outperformed domestic growth for the first time since the epidemic.
The next airline to report is United on Wednesday, followed by American and Alaska Air on Thursday. The others, are expected to do so later this month.
In a note published on Friday, Raymond James analyst Savanthi Syth predicted that United would have revenue tailwinds similar to those seen at Delta. She said, “American and JetBlue should also make a profit, albeit to a lesser level, given to the former’s substantial business and Trans-Atlantic exposure and the latter’s big coastal city exposure.
American raised its third-quarter sales expectation last week from a previous forecast of a 10% to 12% increase, now anticipating revenue to grow 13% from 2019 levels. The business could not provide precise explanations, although Scott Group of Wolfe Research suggested that Delta’s support for foreign travel may contain the key.
In a note published on Friday, he stated, “We believe that strong Atlantic revenue also drove the upside in AAL’s third quarter pre-report, and we expect similar strength from UAL but see less upside revenue potential for other airlines with more pure domestic exposure.
Beginning in September, United increased its revenue projection for the third quarter, anticipating revenue to increase by around 12% compared to 2019, up from an earlier prediction of 11% growth.
There is no question that United will reap financial rewards from improving global demand. After seeing “record levels of demand for travel to Europe” in the summer, up 20% over 2019, the airline added to its summer 2023 itinerary last Monday. It claims it will provide more transatlantic flights than all U.S. airlines combined.
Just days after Labor Day, United’s most recent official prediction will not have anticipated any potential boost through the end of September, when Delta had the highest growth in business reservations. Given that American’s forecast was only last week, there is a greater opportunity for a surprise than there is with the competitor.
The market is far more interested in United and American’s future guidance and new indications of an impending, turbocharged business travel rebound, just as it was with Delta before them.
The Delta stock (NYSE:DAL) is once more rising
Analysts were trying to raise expectations in response to Delta’s report. Analysts now agree that the fourth quarter’s adjusted earnings per share will be $1.05. It was less than $0.80.
On its return to business travel, Delta receives an upgrade.
The airline, the first significant carrier to announce profits this earnings season, missed expectations for the third quarter on Thursday but gave positive forecasts for the next three months of the year due to increasing business travel demand.
If United and American see the same favorable conditions, there may be a repetition this week.
Featured Image – Megapixl © Banol2007
Author Valerie Remorosa