The Travel Sector Is a Microcosm of Inflation Challenges

Inflation is chief among them. Traveling over the holiday weekend means eye-watering fares; by one estimate, domestic flight prices have climbed 38% since January. It is worse for airlines, which face a nearly 160% annual increase in jet-fuel costs.

Delta said it hasn’t seen any pushback against higher prices, for now, and Wall Street was willing to look past its pressured profit margins to celebrate a strong second-quarter outlook. Investors bid the stock higher and optimism spread to

American Airlines and

Southwest, which both had their best days since late 2020.

But uncertainty remains.

The Omicron coronavirus variant has shown just how quickly plans can be disrupted, and staff shortages in a tight labor market exacerbate waves of flight delays. Remarkably bad weather hasn’t helped, either. Delta only returned to profit in March. And while corporate travel is coming back, both airlines and workers are asking whether working from home is a permanent shift.

The great travel rebound—like the end of the pandemic and full economic recovery—has long been heralded. Travel is near prepandemic levels, but eking out those last few miles is unlikely to happen uniformly, and turbulence can be expected.

—Jack Denton

*** Join Barron’s senior managing editor Lauren R. Rublin and healthcare industry reporter Josh Nathan-Kazis today at noon as they discuss the outlook for healthcare stocks, and the latest news on Covid-19 treatments and vaccines. Sign up here.

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Air Travel Rebounding Despite Higher Fares, Fuel Costs

Travel volumes are approaching prepandemic levels as coronavirus restrictions end and people are vacationing and visiting family again, but airfares jumped 10.7% in March from February. Airlines and airports are juggling the surge in passengers with the continuing labor shortage.

• Delta Air Lines, the first major U.S. carrier to report earnings, expects a profitable second quarter, despite soaring fuel prices. CEO Ed Bastian said Delta is seeing a “historic level” of sales activity and booking volumes, and the strong demand for seats has helped it recoup rising fuel costs.

• Delta’s first-quarter jet fuel prices rose 33%, to $2.79 a gallon. The company expects the price to climb in the second quarter to as high as $3.35 a gallon, including a 20 cent-a-gallon benefit from the refinery it owns.

• American Airlines expects jet fuel to cost up to $2.85 a gallon for its first quarter, up from previous projections of up to $2.78 a gallon. Delta said higher fuel prices contributed to an 11% increase in first-quarter operating expenses.

• About 83% of regional carriers are finding job recruiting to be challenging, an Oliver Wyman study reported. North America is projected to be short by more than 12,000 pilots by 2023.

  
  Alaska Air Group calculates that 10,000 pilots left the industry during the pandemic.

What’s Next: Passengers must keep wearing masks on airplanes, buses, and other public transportation and inside public transit hubs through May 3, as the Centers for Disease Control and Prevention studies the more contagious BA.2 Omicron coronavirus subvariant, now estimated to be 86% of circulating viruses.

—Janet H. Cho

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The Great Return: New Offices, Worker ‘Appreciation’ Events

Alphabet’s Google will pour $9.5 billion into offices and data centers this year, an admittedly counterintuitive move in the hybrid work era, but one aimed at improving worker quality of life and stronger communities. A new Atlanta office opens this year, and one in Austin, Texas, is under construction.

• Google’s latest plan will create 12,000 full-time jobs this year. Since 2017, it has invested $37 billion in offices and data centers in 26 states and created 40,000 jobs. New data centers are on deck for Tennessee, Iowa, and Oklahoma.

• Pandemic darling

  
  Zoom Video Communications is trying to evolve along with hybrid work conditions. On Wednesday it rolled out what it calls Zoom IQ for Sales, which helps analyze customer interactions from sales meetings.

• Big tech is wooing workers back to the office. Google has a private concert by Lizzo, and events featuring food and swag, the New York Times reported.

  
  Microsoft invited local bands, held beer and wine tastings, and offered cornhole and basket-making “appreciation” events.

• Google workers returned to the office at least part time April 4. It is offering to reimburse the $49 monthly cost of electric scooters as a transportation option for staff alongside its wifi-equipped luxury buses, the Times reported.

What’s Next: Stanford University economics professor Nick Bloom, who surveys 5,000 workers every month, said most want to return to the office two or three times a week, while one-third would rather stay remote. Being in the office is good for culture, but working from home is quieter and saves money.

—Janet H. Cho

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Why Aren’t Federal Taxes Due April 15 This Year?

Taxpayers who have procrastinated on filing their federal tax returns can breathe easier: This year’s deadline for most people is Monday, April 18, not Friday, April 15. Washington, D.C., home to the Internal Revenue Service, observes Emancipation Day on Friday, so everyone gets more time.

• Emancipation Day commemorates President Abraham Lincoln abolishing slavery in the district on April 16, 1862. This year, the anniversary is a Saturday, so the district moved the observation up a day.

• Taxpayers in Maine and Massachusetts get even more time because of Patriots’ Day on Monday, which commemorates early American Revolutionary War battles. That is also the day of the Boston Marathon. Federal tax returns in those two states are due on Tuesday, April 19.

• Taxpayers in areas hit by natural disasters, as listed at the IRS.gov website, also get extra time. Tennessee taxpayers affected by tornadoes on Dec. 10 and Colorado taxpayers hit by severe winds and wildfires in late December have until May 16. Puerto Rican residents sidelined by heavy storms, flooding, and landslides in February have until June 15.

• Monday is also the deadline for people who haven’t filed their returns for tax year 2018. The IRS said $1.5 billion in refunds have yet to be claimed for that year. Those who need extra time for 2021 returns can request an extension to Oct. 17 by Monday.

What’s Next: The IRS is whittling down its pile of unprocessed tax returns, with plans to hire 5,000 employees in coming months, and another 5,000 by September 2023. President Joe Biden has said expanding the IRS’ enforcement capacity could capture $400 billion in unpaid taxes.

—Liz Moyer and Janet H. Cho

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Retail Specialty Stores Seen More Vulnerable to Closure Trends

Retailers rode out the pandemic and are starting to come back, but UBS analyst Michael Lasser still forecasts as many as 50,000 store closures in the next five years, with the weight likely coming down harder on stores that specialize in clothing and accessories, consumer electronics, and home furnishings.

• Lasser forecast 80,000 store closures over five years last year, and that is out of 880,000 U.S. retail stores. The analyst’s projections assume retail sales grow 4% annually to 2026 and the economy doesn’t fall into a recession. In that case, he foresees twice as many store closures.

• Stores offering general merchandise and auto parts could see net openings, Lasser said. That puts places such as

  
  Walmart,

  
  Target,

  
  Home Depot, and

  
  Lowe’s in a good light while mall-dependent stores such as

  
  Williams-Sonoma could suffer. UBS is also bearish on

  
  Nordstrom,

  
  Macy’s, and

  
  Dillard’s.

• 
  Bed Bath & Beyond reported a surprise quarterly loss on light sales. Same-store sales fell 12%, as comparisons at Bed Bath locations were off 15% while buybuy Baby notched a low-single-digit increase. Analysts expected an 8.5% drop in same-store sales.

• CEO Mark Tritton attributed the sales shortfall to supply-chain delays, with many categories missing one-third of goods. That cost the retailer $175 million in lost sales, The Wall Street Journal reported. Sales are running down by around 20% in the current quarter.

What’s Next: New store openings this year outpace closures, CNBC reported, citing tracking data by Coresight Research. Retailers have announced 3,694 store openings compared with 1,385 store closures. Store growth is driven by dollar stores and discounters.

—Liz Moyer

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Chip Demand Helps TSMC Beat Earnings Estimates

Continued demand for chips in everything from advanced computing to cars helped

Taiwan Semiconductor Manufacturing beat estimates for first-quarter earnings on Thursday—and strong sales are expected to continue.

• TSMC notched a profit of $1.40 a share on revenue of $17.6 billion in the first three months of 2022. Sales rose 36% year over year and 12% since the last quarter.

• The results soundly beat what was expected by Wall Street. Analysts had estimated TSMC would report earnings per share of $1.35 on revenue of $16.7 billion.

• U.S.-listed shares of TSMC rose 2% in U.S. premarket trading. The shares remain down more than 21% this year, outpacing a near 14% decline for the tech-heavy

  
  Nasdaq Composite
  index.

What’s Next: Nearly every manufacturer in the world—from cars and trucks to refrigerators and videogame consoles—has desperately sought semiconductors. And investors have wanted semiconductor stocks as a result. TSMC’s forecast for the current quarter is strong. The company expects revenue in the three months ending in June to be between $17.6 billion and $18.2 billion. The consensus estimate among analysts was for second-quarter sales to be $17.3 billion.

—Jack Denton and Connor Smith

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When does a solo 401(k) make sense for self-employed people, and what are the contribution limits?

This is Part 2 our story on this subject. For Part 1, see here.

Key point: Self-employed means being a sole proprietor, the sole owner of a single-member limited liability company that is treated as a sole proprietorship for tax purposes, a partner, or a member of a multi-member LLC that is treated as a partnership for tax purposes. If you meet one of those descriptions, this column is aimed at you.

Read more here.

—Bill Bischoff

***

—Newsletter edited by Liz Moyer, Camilla Imperiali, Joe Woelfel, Rupert Steiner