The unimpressive revenue guidance issued by Delta Air Lines (DAL) Thursday and the negative market reaction to the report reflect the muted growth prospects of the airline industry this year. Overall, the near-term outlook for the sector is not very encouraging.
An interim statement on Delta’s financial performance in the fourth quarter – the results for which are expected to be released later this month – showed that fare revenue growth was below expectations. The report triggered concerns that performance of the major airlines in the final months of last year might come in below the market expectation.
Going by Delta’s not-so-impressive revenue performance, it seems aviation firms might not have benefitted from the recent fall in gasoline prices. The company’s back-to-back downward revision of its revenue estimate has dampened investor sentiment, and as a result, all the major airlines witnessed a selloff Thursday.
Delta, meanwhile, narrowed its earnings outlook to the range of $1.25-$1.30 per share, slightly lower than analysts’ forecast. It is estimated that capacity and traffic grew 4% and 3% respectively during the three-month period. Nevertheless, experts are of the view that Delta’s fourth-quarter performance does not necessarily reflect the broader industry trend.
Delta’s shares are currently in the correction mode, after climbing to a record high in November. The stock lost about 19% over the past twelve months and closed Thursday’s regular session down 9%.