What's going on?
Delta Air Lines, the world’s largest air carrier, reported a better-than-expected quarterly profit on Thursday – and its shares climbed 2%. Follow the greens, Delta niner…
What does this mean?
Back in January, Delta joined the covey of airlines lowering their 2019 earnings expectations – blaming reduced demand on the US government shutdown. But while rivals’ profit projections descended further after the grounding of Boeing’s 737 MAX jets, Delta – which doesn’t fly any such planes – only increased its altitude. It was able to capitalize on disrupted flights elsewhere and gain market share.
And a strong US dollar – which hit profits at American companies like Pepsi – may have helped 90-year-old Delta by encouraging more Americans to take cheap trips overseas. Ten times as many now venture abroad as did in 1990 (tweet this).
Why should I care?
For markets: Clues in the clouds.
Delta also raised its profit forecast for the rest of the year on Thursday – it thinks its current momentum will continue to provide a helpful tailwind. If Delta’s right, that could give investors clues about how other companies are doing. The airline saw an uptick in corporate bookings last quarter – which could be evidence of more company executives and bankers traveling to negotiate mergers and acquisitions. Banks may therefore have been raking in more fees than feared – and deals later this year could venture into the slipstream of lowered interest rates making it cheaper for companies to borrow money to pay for them.
The bigger picture: Delta’s gamma rays.
Delta’s the Incredible Hulk of the airline industry: not content with owning half of Virgin Atlantic (the founder of which now has his eye on Galactic travel), it announced a smashing investment in Korean Air last month, adding to the Aeromexico and Air France-KLM stickers already on its suitcase. Better pricing and schedule coordination could create a stronger international presence for Delta – and insulate its earnings from any future turbulence back home.