Flight cancellations have extended into Martin Luther King Jr. Day as airlines grapple with freezing temperatures and heavy snow. This ongoing weekend travel disruption poses yet another challenge for airlines, potentially affecting first-quarter earnings.
A Seasonal Setback for U.S. Airlines
While a few days of disruption may not have a significant impact, the first three months of the year are historically the weakest for U.S. airlines. Moreover, travel over the Martin Luther King Jr. Day and Presidents Day weekends usually plays a crucial role during this period.
A Significant Number of Canceled Flights
According to flight-tracking website FlightAware, nearly 3,000 flights within, into, or out of the U.S. were canceled over the weekend. As of 6 a.m. Eastern Time on Monday, an additional 1,477 flights have been canceled.
Impact on Major Airlines
Early on Monday, Southwest Airlines canceled 615 flights, which accounts for 15% of its daily schedule. Similarly, United Airlines canceled 274 flights, or 10% of its schedule. Alaska Airlines followed suit with 153 canceled flights, representing 22% of its schedule. Recently, both United and Alaska have had to cancel approximately 7% and 20% of their daily flights, respectively, due to the grounding of Boeing 737 MAX 9 jets.
Denver International Airport and Chicago Midway International Experience High Flight Cancellations
Denver International Airport and Chicago Midway International were heavily impacted by flight cancellations on Monday. In Denver, 16% of outbound flights and 17% of inbound flights were canceled, while over 30% of flights departing from Chicago Midway International were canceled.
Delta Stock Plummeted After Lowering Earnings Expectation for 2024
Delta stock took a major hit on Friday, dropping 9% after the airline announced that it now expects its earnings for 2024 to be between $6 and $7 per share. This is a significant decrease from their previous long-term target of over $7 per share for this year. The news unsettled investors, causing a domino effect in the industry. United Airlines stock dipped by 10.6%, and American Airlines saw a decline of 9%. Southwest Airlines also experienced a 4% decrease, while JetBlue Airways fell by 6%.
Analysts View Delta's Slump as a Buying Opportunity
However, TD Cowen analysts see Delta's stock decline as an opportunity for investors. In a note on Friday, they maintained their positive outlook on the stock, stating that it presents a buying opportunity. They have reiterated their Outperform rating on Delta's stock and set a price target of $49, indicating a potential upside of 27% from Friday's closing price.
Potential Factors That Could Impact Earnings
Helane Becker, an analyst, pointed out that Delta's management may be acting conservatively by projecting earnings in the range of $6 to $7 per share. According to her, there are several challenges that could potentially impact these results, such as volatile fuel prices and supply chain pressures. She also mentioned that for earnings to surpass $7 per share, there would need to be significant positive surprises.
Upcoming Earnings Report from United Airlines
United Airlines is set to report their earnings on January 22nd. The ongoing disruptions in the industry are likely to impact first-quarter guidance for the sector. Investors will be eagerly awaiting the upcoming report to gain further insight into the current state of the airline industry.
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