Shares of Delta Air Lines Inc. (DAL) gained 1.8% to close at $45.77 on June 21, spiked by a Reuters news report on the airlines’ plan to hire over 1,000 pilots by next summer.
The additional hiring is driven by the management’s belief that U.S. leisure travel volumes will return to the pre-pandemic levels. The airline is also seeing a surge in business travel.
Notably, Delta expects to post a pre-tax profit in the second half of 2021, after posting huge losses in FY20 due to the COVID-19 situation. The profit will be aided by the expected restart of corporate America by Labor Day (September 6).
Delta’s Chief of Operations John Laughter said, “The fact that we expect to record a profit in June – just 15 months after the sharpest decline in aviation history – is remarkable”. Laughter anticipates that travel restrictions will alleviate across the Atlantic in the second half of 2021, with re-openings expected in Spain, France, Italy, and Greece.
Importantly, June 20 marked the highest number of U.S. travelers, 2.1 million, since the beginning of the pandemic in March 2020. However, this number is still 23% lower than pre-pandemic levels.
Consequentially, other airlines are also gearing up to increase the number of pilots and overall employees to meet the increasing demand.
Likewise, American Airlines (AAL) announced its plans to resume pilot hiring in the fall, with approximately 300 new pilots joining by the end of the year and double that number in 2022.
Meanwhile, Southwest Airlines (LUV) expects to hire First Officers later this year “to support the airline’s 2022 operations and scheduled aircraft deliveries.” However, 500 pilots are still under its voluntary leave program.
In addition, United Airlines Holdings (UAL) intends to add 300 new pilots in the coming weeks. Beyond that, incremental hiring will depend on the recovery trends. Longer-term, United plans to hire around 10,000 pilots by 2030.
Wolfe Research analyst Hunter Keay recently upgraded Delta to Buy from Sell with a price target of $55 (20.2% upside potential).
Keay’s upgrade is based on “pent-up demand scenario later this summer, unlike what’s happening with leisure now.” However, he remains doubtful that business travel will return to pre-pandemic levels in the long run.
Overall, Delta Airlines has a Moderate Buy consensus rating based on 8 Buys and 3 Holds. The average Delta Airlines analyst price target of $58.75 implies 28.4% upside potential from current levels. Shares of DAL have jumped 56% over the past year.