ethernal

Delta fare warning sends airline stocks lower - CNN

Sounds like the excuse was very seasonal in nature (people took off in December sooner than expected) - but it seems unlikely that it was solely due to one week of travel. Article also references low oil prices potentially triggering a capacity glut as airlines add more flights due to lower marginal costs. Here's to hoping for cheaper fares in 2019!

Here's Delta's actual press release.

kop84

I would say that with X-mas on a Tuesday that my job was crazy busy up through the 18th and then the last two weeks has been hardly anything. If I had the vacation time, I'd have just left the office for the whole stretch and come back to maybe a dozen emails. Historically there has been at least another week of activity spread among Xmas week and the week after.

It may be a softening economy (straining so hard not to venture into OMNI territory on this) or it might be that people just actually decided to use their Vacation time this year. But we have also had about an 8-10 year Bull market now, we're due for a downturn anyhow.

HDQDD

I saw their stock was off ~9% today. Ouch. My opinion as an investor is that the large caps have been punished far worse than what's called for, at least so far. For example it's hard to believe AAPL is almost 40% off it's 52 week high. There will be a rebound, it's just hard to say when it will start.

FF524

ethernal

This was downward revenue guidance and not profit guidance - cost of operations would eat at margin and not revenue.

Either way, one could argue that the revenue guidance wasn't that much of a miss (down less than 1% relative to previous guidance), but consensus was that they were going to beat guidance so the "effective" drop is larger than it appears.

FlyBitcoin

We will have to wait until earnings to see how the revenue shortfall breaks down. This is retroactive to the last 3 months of 2018 and may or may not be predictive going forward. Remember, that companies warn when they know revenue will not match estimates. Sometimes it is just a case of the estimates being too high and not anything dramatic about the economy in general. Estimates also probably overestimated an increase in air travel due to a longer stretch between Thanksgiving and Xmas, when in reality, all that did was probably result in less business travel (higher fare class) per week since less business travel occurs after Thanksgiving. Sometimes analysts are lazy and they use too many macro assumptions into revenue estimates.

Delta noted that there was a shortfall in the sales of higher-priced, last-minute fares. The stock got hit hard because it is the second time Delta gave a warning about this quarter regarding revenue per seat mile.

Earnings growth was still good, probably because fuel costs are dropping. The street prefers higher fuel prices since that allows airlines to raise prices. The street prefers to see more revenue over less revenue even if earnings are exactly the same. This makes little sense because airlines are not really growth stocks. Yes, they need to keep market share, but they are not growth stocks.

And if Asia is an issue, then expect airlines with a larger footprint in Asia to have a greater shortfall than Delta will.
Seems like an overreaction in a jittery overall market. The Apple profit warning was much more concerning than this.

Troppy

sdadept

I have noticed a lot more reasonable fares between slc and nyc lately. Those usually are massively high in ski season but right now they are unusually low.

SJC ORD LDR

It feels like the economy is softening and then there is also a government shutdown which isn't good for the economy either.

iflyalexair

Well, here's to hoping they abandon the MQD regime. LOL

kop84

It's unlikely to get better with the government still shutdown and TSA agents calling in "sick" as they aren't currently being paid. For those who haven't yet purchased tickets for travel in the near future, driving is likely looking better and better for longer and longer trips. Especially flights like MSP/OMA which are regularly $800 for a 1-2 day stay and it's "only" a 6 hour drive.

ethernal

I wonder how much the government shutdown affects loads? I would assume certain airports (e.g., DCA) would be more impacted than others - although Delta has low marketshare in the D.C. area compared to AA/UA so it may not impact them as much.

rylan

I doubt it impacts loads at all. Anyone who flies regularly for govt work is still doing so. Its not a full shutdown, only partial for certain agencies.

The airlines are going to try to blame fuel prices or the economy or something when its more likely competition and people getting sick of being nickle and dimed for everything with air travel.

FlyBitcoin

I am doing a 6.5 hour drive each way Friday/Sunday later this month instead of a $286 RT flight. Love DL and the SkyClub, but trying to avoid the crowds, the flu, security, small chance of delays, and the entire airport experience which includes parking fees and waiting for checked luggage. It actually seems like a no-brainer now compared to the past few years.

Of course, living an hour from the departure airport makes that decision a little easier.

kop84

It might not impact loads, but it will probably start to impact yields. It's not going to stop people from going cross country or to Disney or whatever, but the last minute tickets for relatively short flights that have to be among the highest CPM in the airline industry people might start to drive when in the past they would have flown. If TSA staffing issues get worse even having GE and Clear won't help much at certain times. The longer and more hassle it takes to go through security the longer the driving circle gets for many people.