Delta Airlines’ Profit rose nearly 60% in the third quarter as strong travel demand continued throughout the summer, particularly for international travel, although the airline forecast a full-year profit closer to the lower end of a previous estimate after a rise in fuel prices.
In its quarterly report Thursday, Delta said it expected full-year adjusted earnings of $6 to $6.25 per share, after forecasting $6 to $7 per share in July. Delta cut its free cash flow estimate for the year to $2 billion from the $3 billion forecast in the summer.
Delta said it expects solid travel demand in the final three months of the year and estimates revenue will rise 9% to 12% compared to the same quarter in 2022, with earnings per share estimated at between 1.05 and 1 .30 US dollars.
“We expect many of the same trends to continue in the fourth quarter,” CEO Ed Bastian said in a CNBC interview.
An Airbus A330-323 aircraft operated by Delta Air Lines.
Benoit Tessier | Reuters
Delta and other airlines have cut their third-quarter forecasts in recent weeks due to a rise in fuel prices.
“Of course, there is some near-term pressure on fuel consumption, as fuel consumption rose quickly in the third quarter and remained relatively high into the fourth quarter,” Bastian noted.
Here’s how Delta performed in the three months ended Sept. 30 compared to Wall Street’s expectations, based on consensus estimates from LSEG, formerly known as Refinitiv:
- Adjusted earnings per share: US$2.03 cents versus expected US$1.95.
- Adjusted sales: $14.55 billion versus expected $14.56 billion.
Delta posted adjusted revenue of nearly $14.6 billion in the period, up 13% from a year ago and in line with analyst expectations.
Net income was $1.11 billion, or $1.72 per share, in the period, up 59% from $695 million, or $1.08 per share, in the same period last year . Adjusted for third-party refining sales and other items, the company earned $2.03 in the quarter.
Delta and other global airlines are reporting particularly strong demand for international travel, with transatlantic travel standing out. The Atlanta-based airline reported that revenue from those flights rose 34% in the third quarter compared to a year earlier.
Delta’s aircraft were 88% full in the quarter, up one percentage point from the same period last year, despite additional capacity at home and abroad. Passenger unit revenue fell 1.5% year over year. Flight prices have fallen in recent months as airlines have expanded their schedules.
In addition to an increase in international travel, the airline said it has seen a sharp increase in demand for premium seats such as business class or premium economy. Main cabin revenue was $6.62 billion, up 12% from a year earlier, while premium product revenue rose 17% to $5.11 billion, Delta said.
“I know that the low-cost airlines have some challenges, but our premium product, especially domestically, is doing very, very well,” said Bastian in the interview. He added that business travel has recovered more than 80% to 2019 levels.
However, Delta President Glen Hauenstein said on an earnings call Thursday that strikes in Hollywood and the automotive industry have hurt demand from those sectors.
Delta has a market share of more than 70% in Detroit and nearly 20% at Los Angeles International Airport, making it the largest of any airline.
Delta came under fire from customers last month when it announced it would become harder to earn elite frequent flyer status and said it would limit access to its popular airport lounges after travelers faced long lines to get in. Weeks later, Bastian said the airline would make changes to those new policies, which he said may have gone “too far.”
Bastian declined to give details but said changes could be announced in the “coming days.”
“Customers almost universally understand that we had to do something given the high demand for our premium assets,” he said.
United Airlines And American Airlines are expected to report third quarter results next week.