Delta Air Lines lost $940 million in the first quarter yet bookings surged in recent weeks, setting up a breakout summer as Americans try to put the pandemic behind them.
Shares jumped 6% before the opening bell Wednesday on strong revenue numbers and pulled other airlines with it. Shares of Southwest, United and American all rose more than 4%.
The Atlanta airline still faces stiff headwinds, including a sharp rise in fuel and labor costs. And it is not clear whether spiking inflation will throttle travel spending.
On Tuesday, the U.S. reported that inflation in the past year rose at its fastest pace in more than four decades, led by soaring fuel costs, which is the second largest input costs for airlines after labor.
Delta's jet fuel costs rose 33% from just the last quarter. Total adjusted operating expense reached $9 billion in the first three months of the year, up 11% sequentially due to fuel prices and also ramping up operations from the pandemic.
So far, though, neither inflation, the ongoing pandemic nor Russia's war against Ukraine seem to be having any impact on ticket sales. Delta officials say that bookings started to rise in late February and have kept going.
“The last five weeks have been the highest bookings in our history,” CEO Ed Bastian said in an interview. “I think that's an indication that people are through with the virus. They feel they have all the tools and the technology to manage it.”
astian said he expects travel demand to remain strong for two to three months — about as far into the future as airlines care to venture.
"Then, when we get to the fall, that will be the next inflection point as to consumer health, what impact inflation has had on them, higher fuel prices, what impact there is from the virus,” he said.
Delta forecast second-quarter revenue of about 95% of pre-pandemic levels, up from 89% in the first quarter. The trend will be driven by more spending on premium seats and more charging with Delta-branded credit cards.
At the same time, Delta is bracing for much higher costs. It forecast that spending on labor and everything else other than fuel will rise about 17% on a per-seat basis, compared with the same quarter in 2019.
And jet fuel, which cost Delta an average of $2.79 a gallon in the first quarter, is expected to jump to between $3.20 and $3.35. If Delta had paid the higher price in the first quarter, it would have spent an extra $364 million fueling up.
Bastian said travel demand is strong enough to let Delta cover higher fuel costs.
From under 90,000 on some days in April 2020, now more than 2 million people a day on average board planes in the United States. So far in April, airport crowds are down only 9% from April 2019, according to government figures.