Delta loses shine after warning of falling travel demand, but still industry leader

As written here in February, Delta is the leading carrier among the major US airlines.

In terms of profitability, fleet management/modernisation and thus cost effectiveness, and yield management, the guys from Atlanta rule the roost.

With a careful, yet adequate capacity expansion, DAL ably defends its market share while protecting its average load factor which is outstanding for a legacy carrier in a cut-throat competition market such as air travel in the US.

Yet after its recent warning about waning travel demand, my original assumptions re revenue growth and future PE have to be revised downwards from 4 to 2 per cent p.a. and 12, respectively, resulting in a new fair value of about $53.50 a share.

Also, there are two major threats to the company's prospects, that shouldn't go unnoticed. As all the major US airlines, its balance sheet is quite strained and always at risk of sudden, exogenous shocks such as another pandemic or a trade war in North America going rogue. Margins are so thin they simply cannot accomodate any major impact, so you got to be vigilant when investing in an airline even as big as this one.

That said, Delta ought to keep climbing relatively to its peers, even if on a less steep trajectory.