Airline Stocks Rise As Delta Sees Profits This Later Year; Q1 Loss Misses

Delta Air Lines (DAL) reported a steeped first-quarter loss than anticipated but expects a return to profitability in Q3. Delta stock and other airline stocks rose.


The results also arrive shortly before Delta’s open-middle-seat policy — a coronavirus-era measure popular with passengers — is set to end.

Delta Earnings

Estimates: Wall Street expected per-share losses to widen to $2.94 from 51 cents a year ago, as revenue dives 55% to $3.87 billion.

Results: Loss of $3.55 a share on revenue of $4.15 billion. Q1 cash burn averaged $11 million per day and turned positive in March with cash generation of $4 million per day.

“Thanks to the incredible efforts of our people, we achieved positive daily cash generation in the month of March, a remarkable accomplishment considering our middle seat block and the low level of demand for business and international travel,” said CEO Ed Bastian. “If recovery trends hold, we expect positive cash generation for the June quarter and see a path to return to profitability in the September quarter as the demand recovery progresses.”

Delta, at the end of last month, said it would begin making middle seats available once again on its flights starting May 1. As airline stocks tanked last year, Delta began blocking middle seats as a way to make passengers feel more comfortable on flights.

Bastian, in an earlier statement, said that nearly two thirds of people who flew Delta in 2019 expect to have at least one dose of the coronavirus vaccine by May 1. That, he said, gave the carrier “the assurance to offer customers the ability to choose any seat on our aircraft.”

“Since Delta introduced its middle seat block in April 2020, consumer behavior and vaccination rates have been the baseline for Delta’s decision to remove or extend the block throughout the pandemic,” the carrier said.

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‘No. 1 Reason’

Rival airlines loosened their capacity constraints earlier. Last summer, Delta said its policy of keeping the middle seat empty and allowing extra flight-cabin space was the “No. 1 reason” why travelers were choosing to fly with them.

A study released by the CDC on Wednesday indicated that single-aisle and twin-aisle jets with vacant middle seats vacant could reduce Covid-19 exposure by 23% to 57% when compared to full-occupancy flights. The study did not factor in mask usage.

Delta, when asked Wednesday whether those findings changed its plans for the middle seat, said it had “nothing to add.”

Airlines For America, an industry group, said in an email that the industry has “implemented multiple layers of measures aimed at preventing virus transmission.” Those measures included mask mandates, health-check forms, disinfection and “hospital-grade” ventilation.

Risk of transmission onboard an aircraft, it said, was “very low.”

Airline stocks, after being hit hard last year, have rebounded as vaccinations increase. But they took a brief hit this week after the FDA called for a pause on Johnson & Johnson’s (JNJ) vaccine after six cases of a rare blood clot in patients who had received doses. U.S. coronavirus cases are still rising.

Delta Stock, Airline Stocks

Delta stock rallied 0.7% to 48.50 in permarket trading on the stock market today. The stock has a Composite Rating of 53. Its EPS Rating is 9.

Among other airline stocks, American Airlines (AAL) gained 0.9% to 22.58. American is in an ascending base with a 26.19 buy point.

United Airlines (UAL) added 1%, and Southwest (LUV) rose 0.8%. American, United and Southwest report next week.

Delta released the results after its two network-carrier rivals, American and United, reported an uptick in demand earlier in the week.

American on Wednesday said it planned to fly at nearly pre-pandemic levels on domestic flights this summer. The carrier said it would offer more than 150 new flight routes over that time, amid a rebound in leisure-travel demand.

Earlier in the week, American said an adjusted measure of its cash burn turned positive last month. United, as well, said it saw an “acceleration in customer demand for travel and new bookings,” also pushing cash flow into positive territory in March.

Still, airline stocks generally have weak EPS Ratings, as the pandemic causes carriers to lose money.

Follow Bill Peters on Twitter at @IBD_BPeters


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