Delta forecasts another profit after summer boom drives record revenue

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  • In the third quarter, Delta posted $695 million in net income on record revenue, reflecting a surge in summer travel with associated high fares.
  • Delta reported that international travel, especially to Europe, was particularly active.
  • The airline is working to restore capacity to pre-pandemic levels by next summer as business and leisure demand picks up.

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Delta Air Lines expects to make another profit in the last quarter of the year and said that both leisure and business travel continue to recover, brushing aside fears of instability in the economy.

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“Global demand continues to rise as consumers shift spending to experiences, businesses return to travel, and international markets continue to reopen,” CEO Ed Bastian said on Thursday. “Demand is far from being quenched by the hectic summer tourist season.”

The Atlanta-based airline became the first U.S. airline to report third-quarter results, and its bullish outlook contrasts with tensions in other industries, such as some retailers, and fears of high inflation.

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Delta shares added 4% on Thursday, outperforming the broader market.

The carrier said it expects earnings per share of between $1 and $1.25 in the fourth quarter, with revenue 5% to 9% higher than the same period in 2019, suggesting that higher airfare prices will remain unchanged.

In the third quarter, Delta reported a net income of $695 million, or $1.08 per share, compared to a profit of $1.5 billion three years earlier, on record revenue close to $14 billion, as a result of a surge in summer travel with high fares. . Adjusted for one-time items, Delta reported earnings per share of $1.51 and adjusted revenue of $12.8 billion, up 3% from 2019 levels despite a smaller schedule.

Here’s how Delta performed in the third quarter compared to Wall Street’s expectations based on Refinitiv consensus estimates:

  • Adjusted earnings per share: $1.51 vs. expected $1.53.
  • Adjusted income: $12.84 billion vs. expected $12.87 billion.

The start of Delta’s peak spring and summer travel season has been rocky as disruptions have prompted the airline and some of its competitors to cut summer flights to avoid further hassle for travelers. Delta said its capacity will be restored to 92% to 2019 levels in the fourth quarter and that it is working on a full recovery by next summer.

Delta and other airlines are struggling with soaring costs from labor to fuel. Delta’s third-quarter fuel bills rose almost 48% from 2019 to $3.32 billion.

Even excluding fuel, costs per available seat mile rose almost 23% in the latest quarter compared to 2019, in part because Delta hasn’t been flying as much.

On Thursday, Bastian told CNBC’s “Squawk Box” that the airline is close to its staffing needs and has hired about 20,000 people since early 2021 after a similar number bought out at the company’s urging during the downturn due to the coronavirus pandemic. According to him, now the airline is focused on staff training.

International travel, which was largely sidelined in 2020 and 2021, became a bright spot in the third quarter, with unit revenue growth outstripping domestic for the first time since the pandemic began, Delta said, citing Italy, Spain and Greece as top destinations.

american airlineswhich reports its quarterly results next week, raised its third-quarter revenue and earnings guidance on Tuesday, while United Airlines planning another big transatlantic expansion for 2023, bet that international travel will continue to recover.

The owner of British Airways and Iberia International Consolidated Airlines Group on Thursday had a better-than-expected third quarter on strong passenger revenues and said he saw no “signs of weakness” in bookings in the fourth quarter.

Delta and United executives recently said travel across Europe has been resilient this fall.

The airline said business bookings had recovered 80% to pre-pandemic levels at the end of the quarter, and that recent polls show 90% of corporate bills indicate they will maintain or increase fourth-quarter travel versus third.

The carrier said Hurricane Yang, which hit Florida last month, cost it $35 million in revenue and impacted adjusted earnings per share by 3 cents.

Correction: Delta said its capacity will be restored 92% to 2019 levels in the fourth quarter. An earlier version misrepresented the timing of the statement.

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