Airlines warned that rising fuel prices could bite into performance on Wednesday following a busy summer travel season. Early stock market action among airlines was mixed. Southwest Airlines stock stalled following a downgrade and softer reported bookings in August. UAL stock inched higher despite United Airlines concerns of a jump in jet fuel prices. Elsewhere, NFL legend Tom Brady announced a partnership with Delta Airlines.
Southwest Airlines lowered its third-quarter outlook for revenue per available seat mile and noted last-minute leisure bookings softened in August.
"While August 2023 close-in leisure bookings were on the lower-end of the company's expectations, modestly impacted by seasonal trends, overall leisure demand and yields continue to remain healthy," Southwest wrote in a securities filing. "Travel demand during Labor Day weekend was strong and produced record revenue performance for the holiday weekend."
Southwest expects Q3 revenue per available seat mile to fall between 5% and 7%, compared to its previous guidance for a 3% to 7% drop. The company raised its fuel cost guidance to range from $2.70 to $2.80 a gallon, up from $2.55 to $2.65 a gallon.
Southwest noted extreme weather-related disruptions resulted in roughly 1,400 cancellations so far in Q3, but that it shouldn't have a material impact on third-quarter financial performance.
BNP Paribas Exane downgraded Southwest Airlines stock to neutral from outperform early Wednesday and maintained its $34 price target.
BNP Paribas also upgraded American Airlines stock to outperform from neutral early Wednesday with a $20 price target.
In addition, United Airlines also warned that jet fuel prices increased 20% since mid-July. United Airlines said on Wednesday it expects Q3 fuel costs to range between $2.95 to $3.05 per gallon. In July, the company had expected the cost per gallon to range from $2.50 to $2.80. The airline maintained its capacity and operating revenue guidance.
The Federal Aviation Administration issued a nationwide ground stop for United flights on Tuesday after a software update caused a slowdown in the airline's technology systems. The FAA lifted the halt after about an hour.
Tom Brady Signs With Delta
Elsewhere, Delta Airlines announced it signed a partnership with seven-time Super Bowl champion Tom Brady to serve as a long-term strategic advisor. In the role, Brady will develop and advise strategic training and teamwork tools for Delta's 90,000 employees, serve in marketing and engagement initiatives as well as support community efforts.
"Delta's people are driven by their commitment to world-class performance, excellence and a desire to achieve best-in-class results," said Delta CEO Ed Bastian in the announcement. "Bringing a leader like Tom onto the Delta team furthers our mission to connect the world while accelerating our drive to continuously improve for our colleagues, customers and communities."
Like any new member of a team, Brady will spend his first year undergoing Delta's onboarding process. He will also appear on Bastian's "Gaining Altitude" podcast series that features conversations about performance, perseverance and overcoming adversity, according to the release.
"I am grateful to be joining the Delta family, a company I have loved and respected for years," Brady said. "Growing up with a mother as a flight attendant, I have always admired the people that make seamless air transportation possible. Throughout my career, my teammates and I flew Delta countless times, spending hours traveling for some of the most important games of our lives, even celebrating Super Bowl wins on the plane. Those championship teams were built off of great leadership and a commitment to excellence, and Delta certainly shares those qualities. Now, alongside Ed and the Delta team, I look forward to playing my part to continue the company's success."
Airlines: Stock Action
LUV stock fell 2.6% Wednesday following the downgrade and cost outlook. Southwest shares have tumbled nearly 11% so far this year through Wednesday's close.
UAL stock inched lower Wednesday. United shares fell 2.5% Tuesday following the ground stop. Still, UAL stock rallied more than 28% in 2023 through Wednesday's close.
AAL stock ticked higher during trade after the American Airlines upgrade. AAL stock jumped 12.7% this year.
Delta stock eased Wednesday and soared 27% since Dec. 31.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison.
