US AIRLINE SUMMARY: Revenue forecasts upgraded, betting on air travel recovery following Omicron

Delta Airlines (DAL)

• Raised March-quarter revenue outlook to about 78% recovered vs 2019.


• March-quarter expectations: Positive FCF, Solid pre-tax profit, Flat TRASM vs 2019.


• Expects to deliver meaningful profitability in 2022.

Commentary

• Well positioned to recapture higher fuel prices.


• Needs to recapture between USD 15-20 each way on average ticket value of around USD 200 to compensate for higher fuel costs.


• Virgin Atlantic CEO said they are seeing very good signs of recovery despite Ukraine.


• Delta CEO says demand has held up very strong and they haven't seen an impact on US Travellers coming to Europe; is not nervous about the price of oil for the airline industry.


• Can get through the Summer with current cash levels.

United Airlines (UAL)

• Expects Q1-2022 CASM-ex to increase 18% vs 2019 (prev. saw between 14-15%).


• Expects Q1 total operating revenue to be towards the better end of prior -20 to -25% guidance vs. Q1 2019.


• Expects Q1 capacity to be down around 19% vs Q1-2019, below prior guidance of down 16-18%.

Commentary

• Following the COVID peak for Omicron, demand for travel exceeded prior expectations.


• Business traffic rebound faster than expected.

Southwest Airlines (LUV)

• Sees Q1 Available Seat Miles -9 to -10% vs 2019.


• Affirms FY22 capacity view to be down c. 4% vs 2019.


• Raises Q1 operating revenue view to -10 to -8% vs 2019 (prev. -15 to -10%).


• Expect Q2 capacity to be down c.7% vs 2019.


• H2-2022 capacity to be roughly flat vs H2-2019.


• Continues to expect to be profitable in the remaining three quarters and for FY22.


• Q1 fuel hedging cash settlement gains per gallon USD 0.52.

Commentary

• Has seen improvements in revenue trends in March 2022 as COVID cases trend downwards.


• Current leisure trends for spring break travel are strong and above 2019 levels.


• Continues to experience cost pressure due to inflation in labour rates and airport costs.

JetBlue (JBLU)

• Raises Q1 revenue view to -9 to -6% (prev. -16 to -11%) vs 2019 levels due to strong demand.


• Cuts capacity to -1% vs Q1 19 (prev. -1 to +2%).


• Continues to expect CASM ex-fuel to rise between 13-15% vs 2019 levels.

American Airlines (AAL)

• Expects Q1-2022 revenue view to be down roughly 17% vs 2019 (prev. saw -20 to -22% vs 2019).


• Expects Q1 capacity to be down 10-12%.


• Q1 total CASM ex-fuel and net special items expected +11-13%.


• Expects to end Q1 with total available liquidity of above USD 15bln.

Commentary

• Improvement in Q1 revenue is expected to more than offset increases in fuel and other expenses in the quarter.


• Will continue to be fully exposed to fluctuations in aircraft fuel prices.

(LAST WEEK)

Alaska Airlines (ALK)

• Raised Q1 fuel cost expectations to USD 2.6-2.65/gallon (prev. USD 2.45-2.50.gallon).


• Expects capacity to be down 3-5% in H1-2022.


• Continues to plan for a return of 100% pre-COVID capacity by Summer, followed by growth in H2-2022.

Reaction details (12:27)

PRE-MARKET

• Delta Airlines (DAL) +6.5.


• United Airlines (UAL) +5.7%.


• Southwest Airlines (LUV) +3.6%.


• JetBlue (JBLU) +3.2%.


• American Airlines (AAL) +4.1%.


• Alaska Air (ALK) +3.6%.

15 Mar 2022 - 12:25- EquitiesResearch Sheet- Source: Newsquawk