American Airlines and Delta hike revenue forecasts as strong demand offsets rising fuel costs
Both airlines say demand strength is outpacing higher jet fuel costs from the Iran war. Shares of both companies rose
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Delta Air Lines and American Airlines each raised their first-quarter revenue forecasts Tuesday as demand accelerated into March, more than offsetting a roughly $400 million fuel cost increase at each carrier stemming from the Iran war.
American now expects total Q1 revenue to grow more than 10% year-over-year, up from prior guidance of approximately 7% to 10%, the company said in an SEC filing. The company described the revised figure as the highest year-over-year quarterly revenue growth in its history. American is assuming jet fuel costs of approximately $2.75 per gallon for the quarter and now expects its adjusted loss per diluted share to land at the lower end of its initial guidance range of $0.10 to $0.50.
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Delta raised its Q1 revenue growth outlook to the high single digits, up from an initial range of 5% to 7%, the company said in an SEC filing. The airline projected total Q1 revenue of $15 billion to $15.3 billion and said earnings remain within the initial guidance range. Delta cited strength across its main cabin, premium, loyalty, and maintenance, repair and operations segments, with domestic and international unit revenues growing in the mid-single digits year over year.
"The revenue growth for American in the first quarter is incredibly strong, and we see that progressing as we move throughout the year," American CEO Robert Isom said at a JPMorgan $JPM conference on Tuesday, according to CNBC.
Delta CEO Ed Bastian said demand has absorbed the $400 million fuel hit and that bookings continue to rise. "We've seen eight of the top 10 sales days in our history this quarter," he told CNBC. "Even with the war going on, our revenues, our bookings are up 25% year over year." Bastian said the fuel surge is likely to prove more damaging to budget carriers than to airlines whose customers skew toward premium and corporate travel, according to Bloomberg.
Shares in both Delta and American were both up more than 4% shortly after markets opened Tuesday.