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Delta (DAL) to Call Off Guam-Japan Flights on Soft Demand

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According to a report appearing in the Associated Press, Delta Air Lines DAL will no longer operate flights connecting Guam and Japan from January, 2018. Lackluster demand for air travel on the route has made it financially unviable for Delta. Consequently, the Atlanta, GA-based carrier decided to terminate service. 

Following Delta’s decision, United Airlines, which is owned by United Continental Holdings UAL, is the sole U.S.- based company to operate flights on the route. Apart from United Airlines, Japan Airlines operates flights connecting the U.S. island territory to Japan’s Narita airport.

Is North Korea's Missile Threat Responsible?

The above route had become all the more unfriendly for air travel, thereby denting Delta’s profits following North Korea's threat to attack Guam. The threat and the resultant tensions had caused low-cost carrier Hong Kong Express Airways postpone flights on the Japan-Guam route until next summer. North Korea has, in fact, fired couple of missiles over Japan.

In fact, Delta’s decision to withdraw service deals a further blow to the already struggling tourism industry in Guam. Travellers from the Land of the Rising Sun have mostly avoided Guam, following the missile threats. This is further substantiated by the fact that Japanese cancellations accounted for most of the 7000 + tours to Guam that had been called off in August. The tours were of varying nature ranging from educational trips to those for business purposes. The cancellations caused Guam’s tourism sector substantial losses in August.

Delta Air Lines, Inc. Price


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Narita-Saipan Route Still in Operation

Delta will reportedly continue operating daily flights connecting Narita airport and Saipan. The route is financially viable to Delta due to less competition. Saipan is located to Guam’s northeast. With the Guam-Narita service scheduled to end early next year, it remains to be seen whether the Narita-Saipan route attracts more traffic. 

Additionally, the company decided to continue operating on the Palau-Narita route. Palau is located to the southwest of Guam. Flights will operate twice a week on the route.

Zacks Rank & Stocks to Consider

Delta carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the airline space include GOL Linhas Aéreas Inteligentes S.A. GOL and Ryanair Holdings RYAAY), holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GOL Linhas’ stock price has increased more than 50% over the last six months.

Ryanair has seen the Zacks Consensus Estimate for current-year earnings being revised 3.2% upward over the last 60 days.

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Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
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