American, Delta defy oil-price spike and boost revenue outlooks as travel demand accelerates

By Tomi Kilgore

Air carriers' stocks were enjoying their biggest gains since the Iran conflict started, as revenue growth guidance increases in face of surging fuel costs

Delta soothes investor fears over the effect of rising oil prices by raising revenue guidance.

Shares of Delta Air Lines and American Airlines were rallying Tuesday, after the air carriers effectively told investors not to worry about surging oil prices by raising their revenue growth outlooks for the current quarter.

The upbeat guidance comes as the airline sector has been hit hard this month as the Iran conflict raged, amid fears that rising fuel costs would hurt profits and reduce demand for air travel. But Delta said in a presentation for the J.P. Morgan Industrials Conference that both consumer and corporate demand "have accelerated into March, and American said demand for its premium products remains "very, very strong."

Delta's stock (DAL) jumped 5% in recent afternoon trading, toward its biggest gain since Feb. 6, well before the Iran conflict started on Feb. 28, while American shares (AAL) climbed 3.3% toward their best day since Feb. 26. The gains came prices for brent crude oil futures (BRN00) rose 1.7% to nearly $102.

Delta said it now expects first-quarter revenue to increase from a year ago in the high-single-digit percentage range, compared with previous growth guidance of 5% to 7%. The company said that puts the total revenue outlook for the current quarter at about $15 billion to $15.3 billion, which would be well above the average analyst estimate compiled by FactSet of $14.74 billion.

The company said it is seeing strength across a number of its offerings, including main and premium seating; from its loyalty customers; and from the maintenance, repair and overhaul business.

American said it now expects first quarter total revenue to increase more than 10% from last year versus previous guidance for growth of 7% to 10%. Besides just strong demand for premium products, American said main cabin demand and economic traffic were also improving.

Meanwhile, despite the increased revenue guidance, Delta kept its first-quarter profit outlook intact with costs set to rise. The company said in January that it expects earnings per share of 50 cents to 90 cents.

Delta projects costs per available seat mile to increase to about 20.75 to 21.05 cents; at the midpoint of that range, that translates to growth of 6.1% from 19.69 cents a year before. The biggest reason for that increase: Expenses for aircraft fuel and related taxes are expected to be up 9.4%.

American actually provided a somewhat downbeat outlook due to the "rapid increase in jet fuel prices," saying it now expects adjusted losses per share at the wider part of the previously provided range of 10 cents to 50 cents.

American said that since it reported fourth-quarter results on Jan. 27, rising fuel prices have already boosted first-quarter expenses by about $400 million. Even excluding fuel costs, the company raised its CASM growth guidance to about 4% to 5% from 3% to 5%.

Delta's stock had been outperforming its peers since the Iran conflict started, having lost 2.8% in March, while the U.S. Global Jets ETF JETS has dropped 11.8%. Among its top rivals, American's stock has slumped 17.1% this month and United Airlines Holdings shares (UAL) have shed 11.4%.

Meanwhile, brent crude futures have run up 40.1% this month.

-Tomi Kilgore

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03-17-26 1310ET