Delta Air Lines Says Summer Bookings To Overheased

An industry rally was spurred by the Bloomberg Delta Air Lines Inc., as it said a rebound in summer travel bookings will help the carrier overcome rising fuel costs and a slow return of business travel.

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While the airline posted a first-quarter loss, it stood firm with previous projections that it would be profitable for the remainder of the year. Delta is sensitive to the risk that fare hikes will erode demand, but sees no sign that it has occurred.

The Delta Chief Executive Officer Ed Bastian said in an interview that booking activity has been quite strong through the early part of the summer. He said that the Atlanta-based airline had record sales heading into the spring.

Since March 1, after Russia invaded Ukraine, the industry has been able to cushion the blow of higher fuel prices, which have soared 155% since March 1. The increased expenses, particularly in the Northeast, have threatened to erode industry profits. Delta and other carriers have throttled back the number of seats to boost prices and continue to believe that summer demand could surpass pre-pandemic levels.

The confidence of Delta, the first major carrier to report first-quarter results, lifted shares across the industry. Delta led the rally, with its shares climbing 5.6% before the start of regular trading in New York.

Andrew Didora, Bank of America analyst said that ticket prices haven't discouraged many travelers. In an April 11 report he wrote, the demand for travel has been robust and out of the way of inflationary pressure.

Delta has said it will have no difficulty raising fares to cover fuel prices this quarter and possibly through the summer. A 1 cent a gallon increase adds to the carrier's annual costs by $40 million, according to a regulatory filing.

The industry isn't out of the woods, despite the rosy outlook of the airline. Deutsche Bank analyst Michael Linenberg predicted that 11 U.S. airlines will record a pretax loss of as much as $6.2 billion for the quarter.

While domestic leisure demand is around 2019 for many carriers, U.S. corporate travel remains 40% less than what was before the Covid- 19 epidemic, according to Jefferies analyst Sheila Kahyaoglu. International travel from big companies has lagged behind a wider economic recovery, as businesses have been slow to send workers back to offices. Much of Asia is closed to inbound passengers.

Delta reported a first-quarter loss of $1.23 a share, a decrease smaller than the average $1.26 deficit, according to analyst estimates compiled by Bloomberg. Revenue was $8.16 billion, while Wall Street estimated $8.12 billion.

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