Airline stocks are jumping higher today after Delta Air Lines (NYSE:DAL) issued strong first-quarter results and provided positive forward guidance.
Shares of American Airlines (NASDAQ:AAL), Southwest Airlines (NYSE:LUV) and United Airlines (NASDAQ:UAL) are each up today after Delta’s Q1 results came in stronger than expected and the company indicated that bookings for flights are surging this year.
What Happened With Airline Stocks
In announcing its first-quarter results, Delta Airlines said that it anticipates returning to profitability in the current second quarter as flight bookings rise sharply from a year earlier. Atlanta, Georgia-based Delta forecast that its Q2 capacity will come in at 84% of 2019 pre-pandemic levels.
That news lifted DAL stock by 4% today to $40.30 a share. Year to date, Delta Airlines stock had been down 4% as the post-pandemic recovery in airlines remained uncertain with subsequent waves and new variants of the disease weighing on consumers’ travel intentions.
For the first quarter of this year, Delta Airlines reported a net loss of $940 million on revenue of $9.35 billion, above the $8.92 billion in revenue that Wall Street expected. Delta said that higher fuel costs pulled down its Q1 results, noting that its fuel bill rose 6% from 2019 to $2.09 billion, even though its capacity was down 17%.
Airline fuel prices are up more than 50% since the start of this year.
Why It Matters
Airlines and their stocks have been punished since the Covid-19 pandemic began in 2020. The International Air Transport Association (IATA) estimates that airlines worldwide collectively lost $200 billion during the pandemic as travel demand collapsed.
The NYSE Arca Airline Index is down nearly 30% over the past year as shares of major carriers have sunk on negative investor sentiment. Delta’s outlook provides a much-needed boost of confidence to the entire airline sector, which is why stocks of air carriers are up across the board today.
What’s Next
Airline stocks get a nice bounce today following Delta’s Q1 print. How long the upward trend lasts will depend on the results and guidance provided by other major U.S. carriers. If other airlines such as American and United provide similarly strong forecasts in coming weeks, then this could be the beginning of a meaningful recovery in airline stocks.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
