Last week,Delta Air Lines(NYSE:DAL)kicked off airline earnings season on a high note and took the rest of the sector along for the ride. Shares of Delta,American Airlines Group(NASDAQ:AAL),United Airlines Holdings(NASDAQ:UAL),JetBlue Airways(NASDAQ:JBLU), andSpirit Airlines(NYSE:SAVE)all climbed as much as 5% on Thursday morning on hope that a recovery is at hand.$Delta Air Lines(DAL)$
Delta Air Lines Performance
Airline stocksendured a miserable 2020 due to the pandemic, and 2021 was choppy as investors weighed signs of pent-up demand against the threat of new variants and renewed travel restrictions. Investors are eager to see what the companies have to say about 2022, and Delta on Thursday provided reason for optimism.
In the fourth quarter, the company's revenue was US $9.47 billion, and its earnings per share was US $0.22, which was higher than the market forecast of US $9.2 billion in revenue of US $0.14 EPS.
The adjusted pre-tax profit was US $170 million, and the adjusted operating income was US $8.4 billion, which was 74% higher than the performance before the epidemic in the same quarter of 2019. At the same time, the capacity has recovered to the level of two years ago. In addition, the adjusted operating expenses decreased by 19%, that is, $1.9 billion, indicating that Delta Air Lines has implemented huge cost control to tide over the epidemic.
Judging from the annual results, it should be said that there are mixed feelings. The adjusted pre-tax loss of $3.4 billion was offset by $3.8 billion from the federal wage support program, while the adjusted operating income of $26.7 billion recovered 57% from the 2019 level and the production capacity level recovered 71%.
Confidence of management
To the delight of investors, Delta Air Lines is more optimistic about 2022. Commercial passengers are coming back and Delta expects capacity in the first quarter of this year to be between 83% and 85% of the same period in 2019. Revenue is set to hit 72pc to 76pc of 2019 levels and while Omicron's surge has impacted early quarter results, Delta is optimistic the uptick will resume ahead of the Presidents Day holiday in February.
Ed Bastian, CEO of Delta Air Lines, said in a statement that 2021 is "a unique year for Delta Air Lines" and stressed that "the growth of brand preference has promoted the recovery and made significant progress, making us the only large airline in the United States to achieve profitability in the second half of the year."
Airlines are expecting another loss in the first quarter due to omicron models and weather issues, but Bastian said "we are confident in the spring and summer tourist season as there are clear signs of pent-up demand from consumers and business travel."
Delta expects a "healthy" profit for the last three quarters of 2022, which should translate into a "meaningful" profit for the whole year. At the end of the third quarter, Delta's total liquidity exceeded $14 billion, and its total debt decreased by $6 billion for the whole year.
Although this is only Delta's financial report, other airlines have also stepped out of the rally. The epidemic is an industry-wide problem, and Delta Air Lines' expectations of demand and profitability are good news for the industry.
Industry ETF bets
Aviation industry has the opportunity. Besides betting on individual stocks, industry ETF is also an option. Here, introduce the aviation ETF, < a href= "https://laohu8.com/s/jeTS "target=" _ blank "> $U.S. Global Jets ETF (JETS) $.
JETS is an industry-wide ETF that invests in American and international passenger aviation companies, including aircraft manufacturers and airlines. About 70% of the portfolio is weighted by large American passenger airlines (calculated by quarterly rebalancing), with the top four companies each accounting for 10%. The next five American or Canadian airlines have a weight of 4% respectively. The weight of top10 positions accounts for 57.6%, as follows:
Personally, we are heading for recovery, but it will take time. Airlines appear to be heading in the right direction, but a new variant could delay the rebound.
If you see the opportunity in the aviation industry, you should fasten your seat belt.
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