Several US airlines issued downbeat forecasts for 3Q21 amid falling ticket sales as the fast-spreading Delta variant threatens to delay the recovery in travel.  

Delta Air Lines, United Airlines and American Airlines posted investor updates today (9 September) with Delta noting that demand in July beat expectations, but the pace of recovery paused in August.  

Earnings-wise, Delta now expects adjusted total revenue to come in at the lower end of prior guidance or to be down 35% compared to 3Q19. The company had previously guided for revenue to fall 30% to 35%. Delta expects its non-fuel unit cost to be up 15% compared to 3Q19, up from previous guidance of an increase of 11% to 14% for the same period.  

The airline credited the lower revenue expectation to a slower recovery in business travel and office re-openings caused by the Delta variant.  

Delta added that the travel environment is choppy. but booking trends have stabilized in the last 10 days and recovery should continue as cases stabilize.

Elsewhere, United added that it has seen a downtick in customer bookings for travel in the past few weeks due to the variant. The company expects revenue for 3Q21 to be down roughly 33% compared to 3Q19.  United also expects 3Q capacity to be down at least 28% compared to 3Q19, compared to initial guidance of being down 26%. 

American also forecasts 3Q21 total revenue to be down 24% to 28% compared to 3Q19, a greater decrease than previous guidance of down 20% for the same period. The company also highlighted that its 3Q21 pre-tax margin will fall between negative 10% and negative 14%, compared to previous guidance of between negative 3% and negative 7% due to lower demand and lower flown capacity.  

Despite the bearish forecasts, trading activity was muted as investors had priced in a travel slowdown amid national spikes in COVID-19 cases coupled with the impact of Hurricane Ida, according to two sources following the situation.  

Delta’s USD 3.5bn 7% senior unsecured notes due 2025 traded today at 117 to yield 2.113%, compared to 117.125 to yield 2.091% on 8 September, according to MarketAxess. The equity traded today at USD 41.48 per share and a market cap of USD 26.51bn, up 4.62% from yesterday’s close.  

American’s USD 500m 3.75% senior unsecured notes due 2025 traded today at 89.75 to yield 7.139%, compared to trades at 90 to yield 7.041% on 7 September, according to MarketAxess. The equity traded today at USD 20.35 per share and a market cap of USD 13.176bn, up 6.36% from yesterday’s close.  

United’s USD 2bn 4.375% senior unsecured notes due 2026 traded today at 104.045 to yield 3.309%, compared to trades at 104 to yield 3.323% on 7 September, according to MarketAxess. The equity traded today at USD 47.26 per share and a market cap of USD 15.63bn, up 3.8% from yesterday’s close. 

2021 Debtwire