Delta Air Lines Inc. is confident that the demand for air travel will continue to rise even after the summer season. With the gradual return of employees to offices and the easing of international travel restrictions, particularly for Europe, Delta foresees a surge in travel during the fall months.
In their recent second-quarter earnings report, Delta surpassed expectations, leading to an optimistic outlook for the rest of the year. Unlike other airline stocks that experienced losses, Delta’s stock saw a 0.4% increase, highlighting their strong performance.
According to Delta’s Chief Executive Ed Bastian, the demand for air travel is robust, with consumers in a favorable financial position, especially the premium consumer base that Delta targets. After spending years on material goods, consumers have shifted their focus to travel, making air-travel tickets their primary big-ticket purchase priority.
However, despite the rising demand, the aviation industry still faces obstacles due to the fragile aviation infrastructure and various constraints across the supply chain. This creates a significant gap between the current supply and the potential demand, which is expected to persist for an extended period.
Delta remains committed to meeting this growing demand for air travel while navigating these challenges and ensuring a seamless travel experience for their customers.
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Airlines Face Challenges in Acquiring New Planes
Getting new planes is still a challenge for most airlines, with order books at jet makers Boeing Co. BA, and Airbus SE AIR, stretching into years of waiting for the newer, more fuel-efficient jets that airlines covet. At the latest Paris air show, order books were getting into the next decade.
Supplier Hiccups Cause Production Halt
Supplier hiccups have also caused problems in the industry. The latest example is the protracted contract negotiations at Spirit AeroSystems Holdings Inc. SPR, a major Boeing supplier, which led to a production halt at one of Spirit’s factories earlier this year. Fortunately, a new contract was approved last month.
Quarterly Results from Airlines
Delta was the first major U.S. airline to report quarterly results, with American Airlines Group Inc. AAL and United Airlines Holdings Inc. UAL reporting their numbers next week, and JetBlue Airways Corp. JBLU reporting theirs in early August.
Hope for Corporate Travel Improvement
Delta President Glen Hauenstein expressed hope for “steady improvement in demand” for corporate travel beyond Labor Day, citing an internal survey showing an uptick in business travel for the second half of the year.
Outlook for International Travel
The outlook for international travel also shows “robust” demand continuing through October. This, combined with positive business travel trends, could potentially lead to an “upside surprise” for Delta, as stated by Hauenstein.
Shares of Delta have gained about 47% so far this year, compared with an advance of around 16% for the S&P 500 SPX.