Airline stocks rose overnight on a positive outlook from Delta Airlines (NYSE:DAL).
Delta said it had an operating loss of $277 million, 57 cents per share, on operating revenue of $12.8 billion for the quarter ending in March. But it expects revenue to rise 15%-20% for the full year, with earnings of around $5 to $6 per share.
This was enough to reverse a 2% loss in April 12 trade. The stock will open on April 13 at about $34.60 per share, right where it was a day earlier.
Holding Pattern
Record bookings for summer travel should buoy the entire airline sector, and most airline stocks reflected this optimism in pre-market trading.
Southwest Airlines (NYSE:LUV), which is still recovering from its holiday service meltdown, fell slightly overnight before rising 1%. American Airlines Group (NYSE:AAL) and United Airlines Holdings (NYSE:UAL) were both up over 2%. JetBlue (NASDAQ:JBLU) and Spirit Airlines (NASDAQ:SAVE), which are fighting a government order to call off their merger, were each up 1%.
Southwest, the industry’s leader through the Covid-19 pandemic, has yet to overcome its problems. It handed CEO Bob Jordan a 75% raise in February. It faces a possible strike by pilots and flight attendants. Yet Jordan refuses to pause growth to fix what broke in December.
That leaves Delta as the industry bellwether. CEO Ed Bastian said he was pleased with the results, despite the loss, saying it was in line with expectations. Delta halted its dividend during the pandemic and still reported nearly $21 billion of debt on its balance sheet, more than twice what it had in 2019.
As the industry tries to recover from Covid, Bastian said Delta would rely on premium travel as a shock absorber against a recession later this year. All 10 analysts following Delta at Tipranks have it on their buy lists. Only six of those following Southwest are recommending it.
Airline Stocks: What Happens Now?
Airline stocks were once a home for steady dividends, but the Covid pandemic knocked all their balance sheets back, and now investors are looking for capital gains. If it can meet its guidance, Delta will deliver.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
