Delta Air Lines CEO, Ed Bastian, recently indicated that the surge in oil prices following the start of the Iran war has been offset by exceptional travel demand. As a result, the Atlanta-based carrier has updated its current-quarter revenue projection and retained its profit forecast despite the rising cost of jet fuel. Consequently, Delta's stock was up by 4% in the latest trades. Shares in United Airlines, American Airlines, and Southwest Airlines also saw gains.
Delta anticipates high-single-digit revenue growth for the first quarter, which surpasses its previous forecast of 5% to 7% year-over-year growth. The boost in earnings is attributed to "demand momentum," according to a presentation released prior to Delta's participation at the J.P. Morgan Industrials Conference.
The strong travel demand is helping airlines neutralize the increasing cost of fuel. If this trend continues, the consumer willingness to spend on travel despite economic pressures could yield benefits for airline profits and stock performances. Delta stated that it was "well positioned to navigate the current environment," and remains prepared to adjust capacity if fuel prices continue to rise.
In a recent interview before the conference, Bastian noted that jet fuel prices nearly doubled at the onset of the quarter, which equated to roughly $400 million in the quarter. However, he added, "the demand strength has been really, really great. We're looking at somewhere around 3 points of higher revenue growth above what we guided for originally in the quarter."
Bastian continued to explain that the uptick in revenue was also counteracting the impact of severe winter storms, costing them roughly 2 points of capacity. He concluded, "we're expecting to come in within the original guidance of 50 to 90 cents EPS, which is still healthy growth on top of that over the prior year." Despite a shaky start to the year with shares down by 12%, Delta shares gradually reversed this trend.