Delta’s Strong Results Lift Airline Sector

14/01/2020 16:16:13 Stock Market

By Kim Khan

Airline stocks caught an updraft Tuesday after Delta Air Lines (NYSE:DAL) came in with solid quarterly numbers ahead of trading.

Delta reported fourth-quarter earnings of $1.70 per share, excluding items, blowing past the consensus forecast of $1.40 compiled by Investing.com.

Total revenue rose 6.5% from the same quarter a year ago to $11.44 billion, topping expectations of $11.34 billion.

Shares of Delta (NYSE:DAL) rose 4% in midday trading.

United Airlines (NASDAQ:UAL) was up 2%, JetBlue Airways (NASDAQ:JBLU) gained 0.4% and American Airlines (NASDAQ:AAL) climbed 1.6%.

The SPDR S&P Transportation ETF (NYSE:XTN) rose 1%.

"There's no question that we're picking up new customers, but that's not the main driver of our performance," Delta CEO Ed Bastian told Reuters, citing a strong brand and customer loyalty at a time when air travel demand continues to rise.

Demand is rising at a time when the grounding of the Boeing 737 MAX is keeping much-needed capacity off the U.S. market, enabling airlines to charge higher fares. Delta profits from that more than most because it has no 737 MAX aircraft.

Demand is rising at a time when the grounding of the Boeing (NYSE:BA) 737 MAX is keeping much-needed capacity off the U.S. market, enabling airlines to charge higher fares. Delta profits from that more than most because it has no 737 MAX aircraft.

Bastian sees the trend continuing in the first quarter with estimated revenue growth of 5% to 7% year-on-year as demand continues to rise "at record levels."

Delta wants to remain a customer of both Boeing (NYSE:BA) and Airbus (PA:AIR) but Bastian said the longer Boeing takes to decide on the NMA - its new midsize plane - the fewer options the airline has. Airbus' A321XLR and A330 could be alternatives to the new Boeing jet, he said.

-- Reuters contributed to this report.