Airlines as a group hardly fly high, but shares included American Airlines (NASDAQ: AAL) and Delta Air Lines (NYSE: DAL) are at least taking part in this week’s market rally.
If you’re like me and have flown regularly for the past year, you may have experienced completely full flights and expensive tickets, which indicates increased airline revenue, as well as cancellations and delays, which only anger and frustrate customers.
Both Delta and American posted gains in July. Delta saw a small rise after the report, but American is trading slightly lower than where it closed after the results.
Delta made $1.44 per share on $13.8 billion in revenue. Those were year-over-year increases of 235% and 94%, respectively.
Despite those annual gains, Delta missed analysts’ bottom-line estimates, but defeated on the top-line.
MarketBeat Earnings Data show that Delta beat results in the previous four quarters, but missed four consecutive quarters in 2020 and 2021. That’s no surprise, as Covid restrictions in the US and international travel have curbed travel.
One of the highlights of Delta:
- Domestic continues to lead the recovery, although international travel is accelerating. Domestic passenger revenues were up 3% and international passenger revenues recovered 81%, compared to the June 2019 quarter.
- Sales in Latin America and Transatlantic both surpassed 2019 levels in June and the pace of the recovery in the Pacific improved significantly, driven by the reopening of Korea and Australia and the easing of restrictions in Japan.
- Business travel recovery is progressing with domestic business sales for the quarter recovering about 80% from 2019, up 25 points from the March quarter.
Delta provided some guidance for the December quarter, saying, “With continued strong bookings, we expect sales in the September quarter to grow 1 to 5 percent compared to 2019, with overall unit sales growth improving sequentially.”
Delta’s chart reflects quite a bit of volatility that has not abated much since the start of the pandemic. Like the airline industry as a whole, it underperforms the S&P 500 index.
Meanwhile, rival American Airlines is also underperforming the broader market for the same reasons.
American reported second-quarter earnings of $0.76 per share on revenue of $13.4 billion. These were both improvements compared to the previous quarter, but the result stood out in particular. According to MarketBeat dataAmerican posted losses for the previous nine quarters, starting with the quarter ending December 2019 — even before Covid restrictions.
In its report, the company highlighted several developments:
- The company continues to execute on its plan to pay off approximately $15 billion in total debt by the end of 2025.
- In the second quarter, American and its regional partners operated more than 500,000 flights, an increase of 8% from the second quarter of 2021, with an average load factor of 87%, which is 10 points higher than in the second quarter of 2021 .
- Despite a challenging business environment in June, American’s Q2 2022 on-time departure rate, on-time arrival rate, and completion rate have each improved from Q2 2019.
American may be starting a new uptrend, but so is the broader market. To use a very precise market forecasting term, who knows?
In fact, the price of the stock flew its highest above the clouds in January 2018 and has been in a long-term downward trend ever since.
It staged a rally between October 2020 and March 2021, but was never able to overcome resistance around $26.
At this point, watch out for American to remain above its $11.93 structure low in June. That’s the relevant floor to keep an eye on. If the stock can rise from there, it could have potential once the broad market goes into a confirmed rally, and once we have more evidence that the economy is improving.
Given the vagaries of fuel prices and a looming recession – which could hurt leisure and business travel plans – now may not be the time to bargain in battered stocks. This is especially true in a sector like the aviation industry, on which the success depends on so many variables.
If you’re wondering about the choice between Delta and American, consider waiting for general economic improvements before buying either one. There are plenty of other industries with potential for strength in the short term. There’s nothing wrong with scooping up stocks while a stock is meanders along the bottom, as long as you’re convinced of the stock’s potential. However, don’t incur opportunity costs by investing in a stock that is still underperforming the market, while others are doing well and flying high.
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.