Delta Air Lines and American Airlines stocks soared in morning trading Tuesday as the carriers stuck to their earnings guidance—and even hiked revenue outlooks—despite surging fuel prices.
Airline stocks have tumbled since the Iran war started but Tuesday could be a pivotal day for the sector. Soaring jet fuel prices –have had investors fearing the worst when it comes to the impact on airlines’ earnings.
Well they will now hear it from the horse’s mouth as the biggest U.S. carriers are set to provide updates at the JPMorgan Industrials Conference in Washington.
Delta shared its presentation ahead of time in a filing early Tuesday. The carrier said it expects its first-quarter guidance to be within its initial range—earnings per share of 50 cents to 90 cents.
It now sees revenue climbing by a high-single-digit percentage, up from a 5% to 7% range back in January. The company cited “demand momentum,” for the hike and added Delta was “well positioned to navigate the current environment.”
The stock rose 5% in morning trading, after rising 3.5% Monday.
American Airlines also raised its revenue growth outlook, now expecting at least a 10% jump in the first quarter, up from a previous range of 7% to 10%. That would be the biggest year-over-year quarterly revenue growth in the company’s history, it said.
However, the “rapid increase in jet fuel prices” means its adjusted loss per share will now come in at the lower end of its 10 cents to 50 cents loss guidance.
Still, sticking to its existing guidance range will be seen as a good outcome by investors–particularly as it has fallen 20% since the conflict started. American stock jumped 4.5% in morning trading.
JetBlue Airways was up 2.2% after it also updated guidance early Tuesday and said strong travel demand was offsetting rising fuel costs and impact of operational disruptions. The low-cost carrier now expects unit revenue to jump between 5% and 7% in the first quarter, up from a previous range of flat to 0.4% growth.
Two winter weather events reduced the airline’s capacity, which also boosted unit revenue—a measure of revenue per available seat mile flown—JetBlue said.
The sector is in need of a lift. Southwest Airlines is down 26% since the conflict began, as of Monday’s close–the second-worst performer in the S&P 500 over that period behindUlta Beauty. United Airlines has tumbled 21%, American Airlines has declined 20%, JetBlue Airways is 23% lower and Delta Air Lines is down 14%. And that’s after they all jumped Monday as oil prices slipped.
All five carriers will present at the conference Tuesday, and could even provide updated first-quarter, or even full-year guidance.
One key question for investors is whether–and to what extent–carriers can mitigate the fuel spike by hiking airfares. United Airlines CEO Scott Kirby said last week that expects a brief surge in fares before ticket prices start to normalize again, in an interview, according to The Wall Street Journal.
“We believe the market will focus on airline commentary around the degree to which higher fuel costs can realistically be passed along through increased fares,” UBS analyst Atul Maheswari said in a note late Sunday.
For airlines to confidently hike fares, demand needs to be strong. Kirby said last Monday was United’s best ever day of bookings, while German carrier Deutsche Lufthansa has reported a sharp rise in long-haul demand since the conflict began.
Tuesday’s updates suggest things may not be quite as bad as feared for U.S. airlines.
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