UBS analysts Darryl Genovesi and Raymond Wong explain what Delta Air Lines’ (DAL) disappointing update yesterday means for American Airlines (AAL), United Continental (UAL) and other carriers:
ASSOCIATED PRESS [Delta's unit] revenue weakness attributed to weaker Latam yields as business travel declined during World Cup. We can see this trend in June agency bookings, followed by sharp recovery in July/Aug. American Airlines is most levered to Latam among our coverage.
Mapping agency bookings across American Airlines’ geographic mix would imply ~5.7% Q2 PRASM growth for it, followed by 4-5% growth in July and August. While our prior Q2 EPS estimate had incorporated some upside beyond this forecast, we are scaling back our expectation with our Q2 EPS estimate moving from $1.96 to $1.85.
Mapping agency bookings across United Continental’s geographic mix would imply ~5% Q2 PRASM growth for it, followed by ~4% growth in July and August, although our Q2 EPS estimate at $2.00 incorporates ~3% PRASM growth, high end of 1-3% guidance.
Shares of Delta Air Lines have gained 1.1% to $38.67 at 12:03 p.m., while United Continental has risen 1.9% to $40 and American Airlines has declined 0.5% to $41.74.
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