What's going on?
Delta might not be your favorite airline, but they did make a lot more profit in the first three months of this year than they did during the same period in 2015. Their stock rose as much as 3% and helped other major US airline stocks climb a similar amount on Thursday.
What does this mean?
Fuel is a huge cost for airlines, so it’s no surprise that lower oil prices significantly helped boost Delta’s profits. The relatively strong US dollar hurt profits because money that Delta makes by selling plane tickets to, say, Europeans is worth less when translated back to their home currency. But with the US dollar now weakening versus most other currencies, it could start boosting Delta’s profit in the future – and that would likely be good for the stock price.
Why should I care?
For you personally: This is a great reminder that when buying stocks, you also need to be aware of the associated currency risks. If you’re Canadian and you bought Delta stock a few weeks ago, you’ve most probably lost money even though Delta stock went up. This is because the US dollar has decreased more versus the Canadian dollar than the stock has increased in value. So, when buying a stock in a different country, remember that currency movements could impact that investment as well.
The bigger picture: This shows you why the oil price is so important. We report on the oil price a lot and it might seem repetitive at times. But it has a huge impact on many companies. Airlines are a great example but automakers, banks and many, many other multi-billion dollar industries are directly impacted by the price of oil.