What happened
What Delta Air Lines (DAL 0.43%) said when it reported earnings today is reverberating throughout the travel sector. The quarterly report has Delta's stock on the rise this morning, and it's bringing other names along for the ride. As of 10:28 a.m. ET, Delta shares were 4.2% higher, while the stocks of fellow carrier American Airlines Group (AAL -2.06%) and cruise operator Carnival (CCL 3.57%) (CUK 3.71%) were up 8.2% and 4.5%, respectively.
So what
The travel industry has seen a recovery from the pandemic come in fits and starts. Surges of the delta and omicron COVID-19 variants have held back the pace of a rebound in consumer travel. On top of that, rising energy prices have increased costs. But Delta said today that consumers are back to booking trips, and it has been enough to overcome the surge in fuel costs. While Delta still reported a $940 million net loss for the first quarter, it importantly said that it returned to profitability in March.
Image source: Getty Images.
Now what
Delta said it achieved a positive operating margin in March of almost 10%, and notably sees operating margin in the range of 12% to 14% in the current quarter. In the second quarter, Delta expects to be at about 84% capacity compared to the pre-pandemic level of 2019.
Delta president Glen Hauenstein also said something that has shares of American Airlines performing even better today. He noted "an accelerating return of business and international travel." American relies more heavily than most airlines on business and international demand, and that statement bodes well for what it says in its quarterly update for investors coming up on April 21.
The news from Delta also shifted sentiment for cruise operator Carnival. Last month, Carnival reported a net loss of $1.9 billion for its fiscal first quarter, ended Feb. 28. The company said in a statement that "the increased uncertainty given the current invasion of Ukraine, including its effect on the price of fuel," is having a material impact on its business.
Fast forward three weeks and Delta's comments have put a new perspective on the dynamics of the recovery for Carnival and others. At the very least, investors likely feel the travel industry has turned the corner even with several remaining challenges. They are showing support for stocks in the sector today as a result.
