Here's Why Your Flight Just Got More Expensive

Now, one couldn't be faulted for staying clear of airline stocks heading into reporting season. Since the start of Operation Epic Fury in late February, jet fuel prices have surged dramatically, creating one of the most acute cost shocks the airline industry has faced in eons. And as you see in my sozzy fun fact of today, there's my really interesting smiley face, airlines need a ton of fuel. And when fuel prices spike, it could very easily hammer profits. To protect profits, airlines jack up ticket prices and bag fees, I know y'all love that, like they are doing now, which could hurt sales. All of the airline stocks have been crushed since the war started, except for one, that is Delta. Delta, believe it or not, has tracked the performance of the S&P 500, street-calling out the company's strong free cash flow generation, or should I say, FCF, and more premium products. Still with me, Eric Jackson, Esfaraite, Jared Blickery, Jared, coming to you. A lot of these airline stocks, for lack of better words, have just really descended since the war began, and it makes a lot of sense to me. Yes, let's go to the Wi-Fi Interactive one more time here. I'm gonna show you our travel intraday heat map. So this is only what's happened today, and you were just talking about Delta. Delta's down 4% right now, I just circled that at the bottom. If I sort by performance, you're gonna see United is the worst off, down 6%. Americans down almost six as well. Southwest is in the mix. But let me show you what's happened over the last month, because this is really where a lot of the damage has been done. Here's Alaska Airlines at the very bottom. They're down 30% over the trailing month, and that's basically when the war began. Then Southwest down 25%. We got the cruise lines in there as well, but here's JetBlue, 16.7. American Airlines, 16%. So this has really hurt a lot of these stocks right now. And it's not just jet fuel, it's also diesel. I think that's another fuel that people aren't talking enough about. Yeah, you're not gonna run a jet on that, but you need it as part of the operations at the airport. The world runs on diesel fuel, and that's another casualty of this war that's really not getting a lot of press. Yeah, and as I think this spike in jet fuel, it hasn't been good, and I don't see how it's gonna get better anytime soon. It spiked 100% over the last month. I just checked the numbers a few minutes ago. So that's huge. As far as spending on airlines, B of A just came out with a report this morning saying that in the last two weeks of March, they saw spending on airfares going down. Part of that may be seasonality, just because of the placement of when Easter is. But the other part, they say, could be because of the higher fuel costs and because travelers are postponing some of their travel plans. But look, the way that the airlines are going to solve this is basically cutting some flights, cutting capacity, canceling flights. You saw United that has already said that they're going to cut capacity by 5%. Others may follow. Eric, I'm really excited for this Delta earnings report. One, because I love earnings season, you know that. This is what we do, we show up during earnings season, in addition to every day, of course. But I think Delta is gonna offer a good example of what we might get throughout earnings season. I mean, here's a well-run company, best in breed CEO, generating a lot of cash, but oh yeah, now they're thrown into a global war, their costs are going up, and it may not be reflecting the stock price. Basically what I'm trying to say, Eric, it's like it's going to offer a good test on how best in breed companies are operating in this type of backdrop, and if the market is going to respect best in breed or they could care less. Yeah, I don't usually play in the airline space, Brian. I gotta admit, I sort of followed Warren Buffett's advice on that one. But one thing I'm really interested in are earnings calls and what CEOs and CFOs in particular say on them. And I've been spending a lot of time focused on studying something that I call tonality IQ, which is how these executives talk about it. And believe it or not, one of the things that is most predictive of better performance, and so I'll be listening for it on the Delta call, is there consistency across a track record of earnings calls from the management team? Do they kind of keep a low-key profile? Do they kind of under-promise, over-deliver? Or are they more erratic? And do they change how they talk about what they focus on? Do they get more overly confident or overly emotional? Those are typically warning signs. You wanna see consistency, dependability. Caterpillar is actually one of the poster children for just amazing consistency across calls. So we'll see with Delta.