Delta’s stock set a new 52 week high today.
In fact it’s a new all-time high for the stock.
That’s not surprising. Passenger revenue per available seat mile is up year-over-year. Their operating margins are growing to 18%. Their planes are full. Delta is doing well, and better than their direct competitors.
At the same time, Delta’s market cap is slightly below its 2015 high when oil prices were under $40 a barrel. The discrepancy is explained by share buybacks in the interim, the company’s share price is higher but isn’t quite as valuable because share buybacks drive down the denominator.
Nonetheless the airline’s financial realities and stock market performance are inconsistent with a claim that competition from the much-smaller Mideast airlines Emirates, Etihad, and Qatar constitute an existential threat to their business.
Ted Reed is all over the media making Delta’s case againstthe Gulf carriers. It seems like the market doesn’t believe it.
— tedreed (@tedreednc) July 7, 2017
Isn't the market telling us something about the lack of threat from the Gulf carriers? https://t.co/qjAbv0Xb7A
— gary leff (@garyleff) July 7, 2017
Reed responds that “Trans-atlantic is not the most important piece for U.S. carriers.”
Either Emirates, Etihad, and Qatar are a threat to Delta’s business or they aren’t. If it’s even close to the existential threat that Delta executives claim, that should be priced into the the market’s valuation of their future prospects. If it doesn’t matter, then the controversy is a tempest in a teapot.
At the very least, critics of the Gulf carriers have to explain why the stock market doesn’t appear to see validity in their position.