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AMERICAN AIRLINES GROUP INC.

(AAL)
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Delta foresees business travel 'renaissance' as airlines tally leisure rebound

06/03/2021 | 08:39am EDT
FILE PHOTO: Ed Bastian, CEO of Delta Air Lines, speaks during a keynote address at the 2019 CES in Las Vegas

June 3 (Reuters) - Delta Air Lines Chief Executive Ed Bastian predicted on Thursday a boom in business travel in September as corporate America emerges from the coronavirus pandemic and businesses reopen, with leisure travel already fully restored.

American Airlines also pointed to continued strength in leisure bookings on Thursday and said it was starting to see increased demand among small and medium sized enterprises and certain large corporate customers.

But investor concerns about higher fuel costs and disappointing second quarter revenue guidance from both airlines sent U.S. airline shares sharply lower in morning trade.

The market has mostly priced in the idea of a U.S. domestic leisure recovery and is now weighing the impact on airlines' bottom lines after heavy losses in 2020.

"Shares are either back to pre-pandemic levels or close to, and earnings aren't expected to return to those levels for at least another 18 months to two years," Cowen analyst Helane Becker said.

One point of uncertainty continues to be the timing and strength of a recovery in business and international travel.

Speaking at a virtual Bernstein conference, Delta's Bastian said: "I think there's going to be a renaissance of business travel in our country, not just for the airlines, I think in general."

He cited a strong desire for people "to get back out on the road and reconnect like never before," something he said "technology can't possibly replicate."

But that does not mean that overall volume will be 20% to 30% lower from 2019, he said, as different types of business travel emerge.

Airlines have said, for example, that as more people work from remote places, they may make trips to the corporate offices once or twice a month.

"I think the lines actually will hold in just fine with where we were in 2019," Bastian said.

Robert Isom, president of American, said that "advancements in technology ultimately drive a need for people to be together."

American said it had positive adjusted cash flow in May for the first time since the pandemic began but still expects revenues to decline 40% in the second quarter versus 2019.

Delta said it expects a pre-tax profit in the second half of 2021 and forecast a second-quarter pre-tax loss of between $1 billion and $1.2 billion, compared with an earlier expectation of between $1 and $1.5 billion loss.

It expects total adjusted revenue of $6 billion to $6.2 billion in the second quarter, versus Wall Street estimates of $6.2 billion. (Reporting by Sanjana Shivdas in Bengaluru and Tracy Rucinski in Chicago Editing by Devika Syamnath, Frances Kerry and Steve Orlofsky)


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN AIRLINES GROUP INC. -1.57% 20.06 Delayed Quote.29.23%
DELTA AIR LINES, INC. -1.13% 39.45 Delayed Quote.-0.77%
S&P 500 -0.18% 4387.16 Delayed Quote.17.02%
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Financials (USD)
Sales 2021 30 615 M - -
Net income 2021 -2 114 M - -
Net Debt 2021 30 520 M - -
P/E ratio 2021 -5,29x
Yield 2021 -
Capitalization 13 195 M 13 195 M -
EV / Sales 2021 1,43x
EV / Sales 2022 1,02x
Nbr of Employees 117 400
Free-Float 98,1%
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Number of Analysts 23
Last Close Price 20,38 $
Average target price 19,78 $
Spread / Average Target -2,97%
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Managers and Directors
William Douglas Parker Chairman & Chief Executive Officer
Robert D. Isom President
Derek J. Kerr Chief Financial & Accounting Officer, Executive VP
Maya Leibman Chief Information Officer & Executive VP
Kevin Brickner Senior Vice President-Technical Operations