Delta Airlines and United Airlines have raised their revenue forecasts for the current quarter on the back of more robust demand even in the midst of higher expected fuel prices.
Delta (ticker: DAL) announced its expectation of revenue recovery in the March quarter to 78% of 2019 levels, an increase from the previous guidance of between 72%- 76% as announced in January. The company also said it expects total revenue per available seat mile to remain flat versus the March 2019 figures.
United Airlines (ticker: UAL) announced its guidance ahead of the JPMorgan industrials conference in New York, pointing out its revenue in the first quarter of 2022 “near the better end” of its range f 20% to 25% lower than the first quarter of 2019.
Delta stock rose 3.7% in pre-market trading, while United Airlines climbed by 4%.
Delta said that its pre-tax loss in the quarter would fall in line with its expectations, even in light of fuel prices. Expected adjusted fuel prices were raised to $2.80 a gallon from the previous guidance of $2.35- $2.50. The company announced that it expects a solid pre-tax profit for March as the more robust revenue offset increased fuel costs.
The airline announced expectations of robust spring and summer travel demand in its updated March quarter outlook, expecting positive free cash flow in March.
“Delta is well-positioned to recapture higher fuel prices given disciplined approach to capacity, strong brand reference and premium product focus,” it announced in a presentation.
According to Delta CEO Ed Bastian, losses were expected in the first months of the year. Still, March should signal the return to profitability, despite the 60-day delay caused by Omicron.
United also increased its fuel price estimate to $2.99 per gallon from $2.51 per gallon in January, while lowering its capacity forecast to a 19% drop versus 2019 levels from a range of 16% to 18% lower. Full-year capacity for 2022 will be reduced by a high single digits percentage compared to pre-covid times, it said, having already forecast it to be lower in January.
With all this in mind, United commented on the fact that travel recovery is accelerating, reporting “very strong” leisure demand and the highest business travel traffic since before the pandemic began, recovering to roughly 70% of 2019 levels so far in March.