What Delta’s Earnings Release and Thursday’s CPI report have in common…

October 14, 2022
Delta’s (DAL) upbeat earnings report infused a bit of hope into a news cycle filled with concern over higher-than-expected inflation

And there’s some overlap here. 

On Delta’s earnings call, leadership noted: “While we are mindful of macro-economic headwinds, the travel industry is experiencing a counter-cyclical recovery. Global demand is continuing to ramp as consumers shift spend to experiences, businesses return to travel, and international markets continue to reopen. Demand has not come close to being cleansed by a hectic summer travel season.” 

However, labor shortages, flight cancellations and delays, and rising fuel costs contributed to a reduction in capacity – in essence, stunting supply and sending airline ticket costs higher. 

You can see this in real-time in LikeFolio macro trend data – specifically in consumer mentions of rising costs to fly.
Air travel price sensitivity mentions remain +77% higher YoY (and higher vs. pre-Covid norms). 

This consumer concern was reflected in Thursday’s CPI report. You can see a breakdown of inflation by category below…check out the second-highest growth segment: Airfare.
So – what should investors be watching from here? 

We’ve got our eyes on 2 things. 

First: How long can pent-up travel demand last? 

Macro trend data tells us that consumers are feeling the burn of inflation.
But right now, travel demand is undeniable. 

Delta cited international and business travel as major drivers of improvement, and LikeFolio data certainly captures this:
These trends will also serve as a bell weather for when pent-up travel demand dries up…or doesn’t. 

We’ll be tracking these mentions in real-time for a slowdown in growth and sign of a pullback in consumer spending in this sector. 

Second: Travel is back, but are all companies reaping the benefits? 

One edge LikeFolio has is understanding consumer loyalty and satisfaction on a company-by-company level. 

Delta noted its customer satisfaction scores are now exceeding 2019 levels. 

And we could see this coming. 

Consumer Happiness – perhaps LikeFolio’s best lens to gauge long-term performance – shows Delta beating peers.
The company has logged the highest amount of happiness improvement over the last month, with Southwest trailing close behind. 

In contrast, sentiment for United Airlines and American Airlines have stagnated (UAL) and dipped (AAL) in the same time frame. 

This is significant because historically, negative sentiment is the most highly correlated metric to revenue for all airline companies. 

And it means that even though Delta beat expectations (setting the bar higher), other airlines may fall short. 

Landon talked about this and the potential opportunity it may present traders on the TD Ameritrade Network.

We’ll be monitoring all of the airlines and other names in travel as we prepare for the upcoming earnings season next week. We can’t wait to kick off.

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