Delta's Gloomy Forecast And Travel Ban Worries Send Airline Stocks Lower -

Delta’s Gloomy Forecast And Travel Ban Worries Send Airline Stocks Lower

Mar 07, 2017Jeremy ParkinsonFinance0

Delta Air Lines, Inc. (DAL – Free Report) on Monday lowered its performance estimates for the first half of 2017, and now its stock is down 3.41% to $48.40 per share through early afternoon trading. Stocks of other big U.S. airlines have also experienced some turbulence on the back of the Delta news, high oil prices, and fallout from President Donald Trump’s travel ban.

Southwest Airlines Co. (LUV – Free Report) stock is down 2.36% to $57.46 per share in Monday trading. American Airlines Group, Inc. (AAL – Free Report) stock is down 4.46% to $44.73 per share. United Continental Holdings, Inc. (UAL – Free Report) stock is down 4.18% to $72.46 per share. And US Global Jets ETF (JETS – Free Report) stock is down 2.08% to $28.71 per share.

Delta’s 8-K filing identified both lower unit revenue and higher costs as reasons for its lowered first half of 2017 expectations. The Atlanta-based airline predicted its Revenue per Available Seat Mile or unit revenue, which is calculated by dividing an airline’s total revenue by its total available seat miles, will be flat in the first quarter of 2017. This came after Delta predicted in January its unit revenue would increase by 2%.

Rising oil prices also contributed to Delta’s lowered expectations. “Market fuel prices are tracking up about 55% for the quarter, which is expected to be the greatest year-on-year increase in 2017,” the filing noted.

This downturn comes only a few weeks after Warren Buffett’s Berkshire Hathaway Inc. bought an eye-popping 43.2 million shares of Southwest Airlines in the fourth quarter.

Berkshire’s new position in the low-cost carrier is valued at $2.2 billion. Buffett’s company also invested heavily in American Airlines, Delta and United, which signaled a shift in Buffett’s decades-long stance that airlines were money-losers.

Updated Travel Ban

Trump and the White House announced Monday morning an updated, less-drastic version of its travel ban. The new executive order removed Iraq from the list, leaving Iran, Libya, Somalia, Sudan, Syria and Yemen. Iraq was removed after political pressure mounted, a great deal of which hung on the continuation of a joint U.S. and Iraqi effort to fight the Islamic State.