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Delta Air Lines Inc. is betting that demand for air travel will stretch beyond summer, as return-to-office mandates lift business and international travel, especially for Europe, into the fall months.
Delta
DAL,
earlier Thursday reported second-quarter earnings that zoomed past Wall Street expectations and boosted its outlook for the year. Delta’s stock was a rare spot of green among airline stocks, up 0.4%, in contrast with losses of 0.2% for the U.S. Global Jets exchange-traded fund
JETS,
Demand is “strong and the consumer is in good financial shape, particularly the premium consumer base that we target,” Delta Chief Executive Ed Bastian said in a call following the results.
After years of spending on goods, consumers want to travel, with air-travel tickets their No. 1 big-ticket purchase priority, Bastian said. At the same time, “aviation infrastructure is still fragile” and the industry continues to face multiple constraints across the supply chain, he said.
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As a result, there’s a “significant gap” between supply in place and what demand could sustain, he said. That gap is likely to remain for an extended period of time, he noted.
Getting new planes is still a challenge for most airlines, with order books at jet makers Boeing Co.
BA,
and Airbus SE
AIR,
stretching into years of waiting for the newer, more fuel-efficient jets that airlines covet. At the latest Paris air show, order books were getting into the next decade.
Supplier hiccups also have persisted, with the latest example being protracted contract negotiations at Spirit AeroSystems Holdings Inc.
SPR,
a major Boeing supplier, that led to a production halt at one of Spirit’s factories earlier this year. A new contract was approved last month.
Delta was the first major U.S. airline to report quarterly results, with American Airlines Group Inc.
AAL,
and United Airlines Holdings Inc.
UAL,
reporting their numbers next week and JetBlue Airways Corp.
JBLU,
reporting theirs in early August.
Delta President Glen Hauenstein said he hoped for “steady improvement in demand” for corporate travel beyond Labor Day, citing an internal survey showing an uptick for business travel in the second half of the year.
The outlook for international travel also shows “robust” demand continuing through October — which, combined with business-travel trends, could give Delta an “upside surprise,” Hauenstein said on the call.
Shares of Delta have gained about 47% so far this year, compared with an advance of around 16% for the S&P 500
SPX,
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