TLDR
- Delta Air Lines upgraded its first-quarter revenue projection to high-single-digit percentage growth from an earlier 5–7% estimate, driven by robust demand
- American Airlines increased its Q1 revenue growth expectation to a minimum of 10% — marking what would be its largest quarterly revenue gain on record
- JetBlue revised its unit revenue forecast upward to 5–7% growth from previously flat expectations
- Major airline stocks had declined 14–26% following the outbreak of conflict with Iran, but surged Tuesday following optimistic company updates
- Resilient passenger demand is enabling airlines to counterbalance elevated jet fuel expenses
Shares of Delta Air Lines and American Airlines experienced significant gains Tuesday following announcements that both carriers were upgrading their revenue projections for the first quarter, despite facing headwinds from escalating jet fuel prices.
Delta’s stock surged approximately 5% during morning sessions. American Airlines shares advanced roughly 2.7%. JetBlue posted gains near 0.5%, while Frontier jumped 7.5%.
The rally followed investor updates from all three airlines before the JPMorgan Industrials Conference taking place in Washington on Tuesday.
Delta announced it anticipates first-quarter revenue to expand by a high-single-digit percentage. This represents an improvement from its previous projection of 5% to 7% growth. The carrier maintained its earnings per share outlook between 50 and 90 cents.
Speaking at the conference, Delta CEO Ed Bastian stated: “We’re seeing strength in every market that we look at.” The airline highlighted momentum building in both leisure and business travel segments as March approaches.
American Airlines elevated its revenue growth projection to a minimum of 10% for the quarter, an increase from its previous 7% to 10% range. The airline indicated this would represent the most substantial year-over-year quarterly revenue expansion in company history.
Neverthstanding, American acknowledged that sharp increases in jet fuel costs will likely drive its adjusted loss per share toward the bottom of its projected 10 to 50 cent loss range.
Understanding the Recent Airline Stock Selloff
Airline equities experienced significant declines following the escalation of conflict involving Iran. Southwest Airlines plummeted 26% from the conflict’s onset through Monday’s market close, positioning it as the second-worst performing stock in the S&P 500 during that timeframe.
United Airlines tumbled 21%, American declined 20%, JetBlue lost 23%, and Delta decreased 14%. These losses persisted despite a modest recovery Monday when crude oil prices retreated.
Investor anxiety centered primarily on concerns that elevated jet fuel costs would severely impact profitability. However, Tuesday’s forecast revisions indicate passenger demand has remained sufficiently strong to mitigate these challenges.
Airlines Demonstrate Pricing Power Amid Rising Costs
United Airlines CEO Scott Kirby indicated last week that he anticipates a temporary spike in ticket prices before stabilization, according to The Wall Street Journal. He also noted that last Monday represented United’s highest-ever single-day booking volume.
German airline Lufthansa similarly reported a significant uptick in long-distance travel demand since the conflict commenced.
UBS analyst Atul Maheswari noted that investors are particularly interested in “the degree to which higher fuel costs can realistically be passed along through increased fares.”
JetBlue attributed strong passenger demand to offsetting both elevated fuel expenses and operational challenges from two winter storm systems during the quarter. The carrier revised its unit revenue guidance — measured as revenue per available seat mile — to growth of 5% to 7%, compared to its earlier forecast of flat to 0.4% expansion.
All five major U.S. airline operators presented at Tuesday’s JPMorgan conference, with some potentially offering updated full-year guidance as well.
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