Delta Posts $735M Profit, Sees Strong 3Q Revenue

Planes were filled to pre-pandemic levels this summer, and that’s giving airlines enough money to cover higher fuel costs — and then some.

Delta Air Lines earned $735 million in the second quarter. However, earnings per share fell short of Wall Street expectations.

Shares of Delta sank 6% on Wednesday and shares of other airlines fell lesser percentages.

Delta blamed the profit loss on high fuel prices and more than 4,000 canceled flights in May and June.

“We had a tough six weeks,” CEO Ed Bastian said. “This is a company, this is an industry … none of us were up to the task.”

Shortly before July 4, airline leaders were reprimanded during a virtual meeting with Transportation Secretary Pete Buttigieg, who implored airlines to do better over the holiday weekend. They did, though airlines and federal officials have since traded blame for massive delays and cancellations so far this summer.

The Atlanta airline had the most canceled flights during Memorial Day weekends and June 16. Bastian said Delta and other airlines tried too hard to offset two years of the pandemic and pull in as much revenue as they could while demand was high. “We probably tried too hard,” he said in an interview.

Bastian said Delta recalibrated by eliminating planned growth this year, continuing to hire pilots and other workers and relaxing the schedule by giving passengers more time to board.

The airline canceled 337 flights or about 1% of its schedule in the first 11 days of July, and only 83 after July 3, a major improvement from earlier in the summer, according to figures from tracking service Flightaware.

While holiday travel is booming, analysts have urged caution about the post-Labor Day period. Business travel, which becomes crucial for airlines once families go home and kids go back to school, hasn’t recovered as quickly as personal travel. Employers are still hiring, but there is more talk of a recession. Consumers are worried about inflation.

Delta is betting that consumers still want to travel and have money, in part because they don’t buy as much for their homes anymore.

Delta forecast third-quarter revenue to be 1% to 5% higher than the same quarter in 2019, though it expects passenger-carrying capacity to be no more than 85% of 2019 levels, a sign of hope. that Delta expects fares to be higher. stay in place.

Oil prices have cooled recently, and that could give Delta another boost. The airline spent more than $3.2 billion on fuel in the second quarter, a 41% increase over the same quarter in 2019. Delta paid an average of $3.82 per gallon for jet fuel, but expects to pay between $3.45 and $3.60 in the third quarter. fourth.

Other expenses, including labor, continue to rise. Delta expects non-fuel costs to increase 22% from 2019 levels per mile in the third quarter.

In the April-June quarter, revenue was $13.82 billion, including $1.5 billion from Delta’s refinery near Philadelphia. Revenue less refinery was just 1% lower than the same quarter in 2019, and that was solely due to weak international traffic.

Passengers traveled 18% fewer miles on Delta than three years ago, but revenue per mile, a proxy for average fares, was up 18%.

Apparently, those higher fares didn’t put off travelers, or at least not many of them. The average flight was 87% full, just one point less than in early summer 2019. By airline standards, that’s a high occupancy figure and indicates that many flights were sold out during desirable morning hours. and the early hours of the night.

Delta said that excluding irregular costs, it earned $1.44 per share. That fell short of the $1.73 a share that analysts surveyed by FactSet had expected.

Spending was up sharply on fuel and modestly on labor, compared to 2019, but Delta paid out just $54 million in profit sharing compared to $518 million three years ago.

Shares of Delta Air Lines Inc. fell 3% before the market opened and other major airlines fell as well.

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