What's going on?
Delta Air Lines shareholders were dealt a pleasant surprise when they checked into the market on Tuesday: the carrier’s stock price got a 4% upgrade after quarterly earnings beat expectations.
What does this mean?
Delta’s financial results for late 2019 overshot the runway: revenue was up 6.5% on a year before, while profit flew more than 30% higher. That was partly down to cheaper fuel lowering costs and domestic demand from US flyers hitting an all-time high over the holiday season. But Delta also banked on the sale of its stake in Brazilian airline Gol, recently ditched in favor of an investment in larger competitor Latam.
Delta cemented its status as a high-flyer, too. Revenue from its premium cabins – business and first class – grew 9%, twice as fast as economy-class revenue. There may be some mild turbulence ahead, however: the airline said flying costs could rise by up to 3% this quarter, partly due to higher staff salaries.
Why should I care?
For markets: Boeing, Boeing, gone.
Another contributor to Delta’s quality quarter was the Boeing 737 Max debacle. While Delta doesn’t fly the grounded plane, its competitors do – so when they canceled flights, travelers turned to Delta instead. If and when Boeing’s jets get set to fly again, Delta could lose out. But its loss may be America’s gain: the US treasury secretary warned on Sunday that Boeing’s woes could reduce US economic growth this year by 0.5 percentage points.
Zooming out: Vertigo or acrophobia?
Air travel is a mercurial industry, and success often lies outside companies’ hands – as the recent mixed fortunes of two European airlines lay bare. Low-cost Irish carrier Ryanair raised its earnings forecast last week, saying bumper Christmas bookings could boost profit by $165 million. UK regional carrier Flybe, however, is flying on empty: a weak pound and Brexit uncertainty have hurt its bookings, forcing it to look to the UK government for a parachute.