Delta Air Lines’ stock can be considered OK. It and the stock market have moved at about the same rate in the past year, with just a few percentages between them as each has traded down.
Investors must consider if Delta and the market will match each other over the next several months. A slower economy and surge in consumer prices may hammer the market. High fuel prices represent a challenge to Delta. However, help has come as passengers travel in greater numbers and pay more.
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Delta faces other challenges, however. Shortages in labor cause delays or canceled flights. While some airlines hedge fuel prices, a relentless rise represents a special challenge.
Air travel sometimes precedes both a fall-off in the economy and the resilience of the entire travel industry. Executives have access to day-by-day data. Wall Street’s chance to see traffic changes usually comes once a month. Executives can pull back prices, to some extent, quickly. Wall Street often has to take the measure of old data or rely on analyst predictions. Either can signal a worry.
While flight schedules help carriers maneuver around cost hurdles, fixed costs cannot be managed as easily. To some extent, a labor shortage means layoffs represent less of an expense reduction tool, and they continue to show the industry’s present predicament.
The cost of airplanes as well has rarely represented a great cost advantage. Their benefits act as a means to control expenses that come from fuel savings more than ownership or lease payments.
Warnings about trouble in the economy number in the dozens. Delta represents one of these.
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