Delta Air Lines’ Profits Soar 60% After Strong Summer

Delta Air Lines’ Profits Soar 60% After Strong Summer

Delta Air Lines’ third-quarter profit surged by almost 60% as strong travel demand persisted throughout the summer, particularly for international journeys. However, the airline adjusted its full-year earnings outlook to the lower end of its previous estimate due to a spike in fuel prices.

In their quarterly report, Delta stated that they expect adjusted full-year earnings to be in the range of $6 to $6.25 per share, down from the $6 to $7 per share forecasted in July. They also revised their free cash flow estimate for the year to $2 billion, a reduction from the $3 billion projected earlier in the summer.

Despite the adjustments, Delta anticipates solid travel demand for the final quarter of the year. They estimate that revenue will increase by 9% to 12% compared to the same quarter in 2022, with per-share earnings expected to be in the range of $1.05 to $1.30, aligning with previous estimates.

Delta’s CEO, Ed Bastian, noted that many of the same trends are expected to continue in the fourth quarter, and he emphasized the pressure on fuel prices in the short term due to a rapid increase in the third quarter, which continued into the fourth quarter.

Here’s a breakdown of how Delta’s performance in the third quarter compared to Wall Street expectations:

  • Adjusted earnings per share: $2.03, surpassing the expected $1.95.
  • Adjusted revenue: $14.55 billion, in line with the expected $14.56 billion.

Delta reported adjusted revenue of nearly $14.6 billion for the quarter, marking a 13% year-over-year increase and aligning with analysts’ predictions.

During this period, the company’s net income reached $1.11 billion, or $1.72 per share, which is a 59% increase from $695 million, or $1.08 per share, in the same period the previous year. When adjusted for third-party refinery sales and other items, the company earned $2.03 per share during the quarter.

Delta, along with other global airlines, noted robust demand for international travel, particularly trans-Atlantic flights, which saw a 34% increase in revenue in the third quarter compared to the previous year. Despite additional capacity on both domestic and international routes, Delta’s planes were 88% full in the quarter, up 1 percentage point from the same period in the previous year. Unit revenue from passengers declined by 1.5% year over year, which coincided with a drop in airfares in recent months due to expanded schedules by airlines.

In addition to the surge in international travel, Delta reported a sharp increase in demand for premium seats, including business class and premium economy. Main cabin revenue reached $6.62 billion, up 12% year-over-year, while sales of premium products rose by 17% to $5.11 billion.

Regarding changes to its frequent flyer and lounge access policies, Delta faced backlash from customers and now plans to modify these new policies, which were perceived as too restrictive. Ed Bastian, the CEO, did not provide specifics but mentioned that these changes might be announced in the coming days.

Customers generally understood that Delta needed to address the high demand for premium assets, according to Bastian, who also noted that business travel has largely recovered to 2019 levels, showing signs of resilience.

Delta executives are scheduled to hold a call with analysts and the media at 10 a.m. Eastern Time to discuss the results further.

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