) -- So there is some life left in the airline industry.
Surprisingly strong margins and revenue per available seat mile growth at
have several analysts raising estimates, following the carrier's filing Wednesday with the Securities and Exchange Commission.
Delta shares rose 5%, closing at $11.18 and leading the sector higher, after it reported that third quarter operating margin would be 12% to 13% and passenger revenue per available seat mile would grow 15% despite system capacity growth of 2%.
JP Morgan analyst Jamie Baker wrote in a report that Delta strengthened its margin estimate from an earlier 10% to 12% and that demand "is tracking better than we expected." He said reports by Delta and
suggest "a slightly better 3Q outcome than we expected
and demand fears will quickly be put to rest."
Baker raised his third quarter estimate for Delta 89 cents and his full-year estimate to $1.36. Analysts surveyed by Thomson Reuters are estimating 92 cents and $1.48. Baker has an overweight on Delta shares.
Meanwhile, analyst Helane Becker of Dahlman Rose, who has a buy on Delta, raised her estimate to 92 cents. Analyst Glenn Engel of Bank of America Merrill Lynch raised his third quarter estimate to 87 cents and his full-year estimate to $1.50. He maintained a neutral rating. He said that "Delta's revenue guidance offers comfort to the sector" following RASM drop-offs in August.
Regarding Alaska, the carrier upgraded earnings guidance to show bookings for September, October and November trending higher as well as continued total RASM growth of 4.3% so far this quarter. As a result, Becker raised her third quarter estimate to $3 and reiterated a buy rating. Baker retained an underweight rating on Alaska. The consensus estimate is $3.18.
In morning trading Wednesday, Delta shares were up 2.5% to $11.46. Alaska Airlines was up 52 cents to $47.96.
-- Written by Ted Reed in Charlotte, N.C.
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