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Disappointing outlook from Delta drags down airline stocks

Disappointing outlook from Delta drags down airline stocks

January 4th, 2019 in Business

FILE- In this May 24, 2018, file photo a Delta Air Lines passenger jet plane, a Boeing 737-900 model, approaches Logan Airport in Boston. Delta Air Lines said Thursday, Jan. 3, 2019, that travel demand remains healthy. However, the lower forecast raised fear among investors that airline revenue and profits could be under pressure in 2019. (AP Photo/Charles Krupa, File)

DALLAS (AP) — Airline stocks were pummeled Thursday after Delta Air Lines Inc. trimmed its revenue forecast for the fourth quarter, renewing investors’ fears that airlines will squander the savings they are reaping from the recent drop in fuel prices.

Delta shares plunged nearly 9 percent, their worst one-day showing since 2012, to close at $45.61.

The parent companies of American Airlines, United Airlines and Alaska Airlines all dropped about 5 percent or more.

Delta, the nation’s No. 2 carrier by traffic, said a closely watched figure of revenue per mile rose about 3 percent in the fourth quarter, a half-point lower than Delta predicted last month and a full point below its October forecast.

The Atlanta-based airline said prices for tickets sold close to departure — often at higher prices — rose less than expected in late December.

Delta said travel demand remained healthy, but its revised revenue outlook fanned fresh fear of weaker airline pricing power seeping into 2019, especially if global economic growth slows.

Airlines raised fares to cover surging fuel prices during the first nine months of 2018, but fuel prices have fallen sharply since early October, which could encourage fare wars by lowering one of the airlines’ major expenses.