DAL has been “UP”, “Climbing” so what is next?

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Delta share price i.e. DAL has been mimicking all the flying type commercials that Delta has been putting out as of late. When you look at the share price from the end of August’s $8.50 range to now $14, that is a very nice jump in value in a short time.

Delta has done well and made money, unlike most airlines. Few are brave enough to invest in airline stocks and I hold NO DAL stock just so you know and I am not suggesting any kind of investment strategy here in this post, just some musings as an interested bystander.

But how long can Delta keep this “UP”? Here are the challenges I am intrigued with. Clearly the price of jet fuel, and thus oil, is a major cost to any airline. If you have not noticed a price spike at the pump as of late, get ready, as it is on the way with oil nearing $100/ barrel again! Ugh.

The next big ideal is the Trainer oil refinery experiment. Margins are thin in refining but Delta expects a “modest” profit for 2013. As a layman, that says to me, if anything goes wrong no profit and instead a loss for the year.

For me, from my “field” of interest, is the addition of the new revenue component to Skymiles. The good thing about the change is that Skymiles did NOT change to a true “revenue based” program with Skymiles; in other words you do NOT earn less Skymiles or MQM’s for any published fare (at least not yet). However, there will be those leaving the airline over this. Just look at the very early results of my poll of asking medallions of what the impact of this will be on them. Will they stay, wait or GO?

The question is will this shift make the airline more or less money? Having released the news early this year, intentionally or not, by this time next year Delta will see if the call was a good one or a grave mistake; maybe doing it this way it will give them time to tweak the program. But, once a loyal Delta flyer departs Skymiles and earns a year’s worth of qualifying miles at another airline, it may be hard to get them back (especially when other airlines have useful SWU certificates when Delta’s are not)!

Anyway, I know there are many who are way smarter than me when it comes to investing. So shout out. Would you or have you ever owned DAL stock or another airline stock. Would you ever buy? Is now a good time to BUY or SELL? Where do you see DAL stock price 1 year from now? Let me know – René

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One comment

  1. At the risk of repeating Wall St concerns ad nauseum, DAL has a perceived overhang:
    Pension “costs” and “assumptions”.
    While this is obviously not the forum for a discussion of such things, the topics are easily Googled or found on any serious business site.
    All that being said, the market does seem to appreciate what DAL is trying to do.

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