Key Takeaways
- Delta Air Lines upgraded its Q1 revenue projection to high-single-digit percentage growth from the previous 5–7% estimate
- American Airlines now projects Q1 revenue growth of at least 10% — marking what would be its largest quarterly revenue increase on record
- JetBlue boosted its unit revenue forecast to 5–7% growth, a significant improvement from its earlier flat outlook
- Since the Iran conflict started, airline equities had declined 14–26%, but rebounded Tuesday following optimistic guidance
- Robust passenger demand is enabling airlines to counterbalance escalating jet fuel expenses
Shares of Delta Air Lines and American Airlines experienced significant upward movement Tuesday following both companies’ announcements of improved first-quarter revenue projections, despite facing headwinds from elevated jet fuel expenses.
Delta’s stock advanced approximately 5% during morning market hours. American Airlines gained roughly 2.7%. JetBlue saw modest gains of about 0.5%, while Frontier surged 7.5%.
The market reaction followed updates provided by the three carriers in advance of Tuesday’s JPMorgan Industrials Conference held in Washington.
Delta announced its revised first-quarter revenue expectation now calls for high-single-digit percentage expansion. This represents an upgrade from the carrier’s previous guidance range of 5% to 7% growth. The airline maintained its earnings per share outlook between 50 and 90 cents.
Speaking at the industry conference, Delta CEO Ed Bastian stated: “We’re seeing strength in every market that we look at.” The airline highlighted momentum building through March from both leisure and business travel segments.
American Airlines increased its first-quarter revenue growth projection to a minimum of 10%, representing an upward revision from its earlier 7% to 10% range. The carrier indicated this performance would establish a new company record for the largest year-over-year quarterly revenue expansion.
Nevertheless, American acknowledged that accelerating jet fuel price increases will likely result in adjusted loss per share landing at the lower boundary of its previously stated 10 to 50 cent loss guidance.
Understanding Recent Pressure on Airline Equities
Airline sector stocks experienced substantial declines following the onset of the Iran conflict. Southwest Airlines suffered a 26% drop from the conflict’s beginning through Monday’s trading close, positioning it as the S&P 500’s second-worst performing stock during that timeframe.
United Airlines fell 21%, American decreased 20%, JetBlue dropped 23%, and Delta declined 14%. These losses persisted despite a modest recovery Monday when crude oil prices retreated.
Investor concerns have centered on the potential for elevated jet fuel costs to severely impact profitability. However, Tuesday’s revised guidance indicates passenger demand remains sufficiently robust to mitigate these challenges.
Airlines Demonstrate Pricing Power Amid Cost Pressures
United Airlines CEO Scott Kirby indicated last week his expectation for a temporary spike in airfare pricing before market stabilization, according to The Wall Street Journal. He additionally noted that last Monday represented United’s highest single-day booking volume in company history.
German aviation company Lufthansa similarly documented a substantial increase in long-distance travel demand since the conflict emerged.
UBS analyst Atul Maheswari noted that investors would closely monitor “the degree to which higher fuel costs can realistically be passed along through increased fares.”
JetBlue indicated that strong passenger demand is successfully offsetting both elevated fuel expenses and operational disruptions from two winter storm systems during the quarter. The carrier revised its unit revenue projection — measured as revenue per available seat mile — to 5% to 7% growth, compared with its prior forecast of flat to 0.4% expansion.
All five major domestic carriers participated in Tuesday’s JPMorgan conference presentations, with some potentially offering updated full-year guidance as well.
