I thought airlines were toast. $100 oil, Strait of Hormuz basically closed, airspace rerouting adding thousands of miles per flight. The bear case was writing itself. Then Delta comes out today and raises Q1 revenue guidance. Turns out people are panic-booking flights to lock in fares before fuel surcharges kick in.
The demand rush is actually offsetting the cost spike, at least for now. American and JetBlue said the same thing. The whole sector is up today.
Is this sustainable or are we just front-loading demand that disappears in Q2 when the fuel surcharges actually hit tickets and people stop booking? Because at $100 oil, these margins don’t survive a demand slowdown. Are airlines actually a buy right now or is today’s rally just a classic bull trap before the real pain hits in Q2?
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Posted by National-Theory1218
5 Comments
Not to mention TSA issues. Surprising
Front loading before disaster.
People were talking about shorting airlines as a strategy. Hope they’re okay.
I did a Google Search to look into Delta’s fuel hedging and I found out that Delta owns a refinery that provides them with around 3/4 of their fuel consumption. Most airlines are moving away from hedging so this refinery could help them keep their prices as low as possible compared to other airlines.
Delta owns its own refineries; it marches to a different beat of the drum than the rest of the industry. Proving to be pretty prescient, all things considered.