CHICAGO: Delta Air Lines reported stronger than expected Thursday quarterly profit on strong international travelbut lowered its full-year outlook due to higher fuel costs.
The strong quarter comes against a backdrop of softening domestic demand This raises questions about consumers cutting back on travel spending as household savings have been depleted, student loan repayments have resumed and high interest rates have begun.
Delta Director Ed Bastiaan cautioned against interpreting this as a broader trend in the sector. In an interview, he said demand for Delta’s products remains “high” because customers are in “very healthy condition.”
“Our domestic business is very strong,” he said. Shares of the US airline rose 2.4% before the bell.
However, a rise in fuel costs is putting pressure on the company’s profits. Delta now expects adjusted earnings of $6 to $6.25 per share this year, up from an estimated $6 to $7 per share in July. The company reported adjusted earnings of $2.03 per share for the third quarter, above analysts’ expectations of $1.95, according to LSEG data, helped by a 35% increase in international passenger revenue from a year ago.
Delta said demand for overseas travel has remained strong throughout the fall season.
For the December quarter, the airline expects adjusted earnings between $1.05 and $1.30 per share. That compares with the $1.11 estimated by Wall Street analysts.
It forecasts an adjusted operating margin of 9% to 11% in the fourth quarter, with revenue up 9% to 12% year over year.
The rush among travelers to make up for lost time during the pandemic has allowed U.S. airlines to ease inflationary pressures with higher fares.
However, airline fares are down double digits from a year ago. Ticket prices for holiday trips have also fallen.
Data from online travel agency Hopper shows that the average round-trip domestic flight for the Thanksgiving holiday next month is down 14% from last year. Similarly, fares for the Christmas travel season are 12% lower than a year ago.
Ultra-low-cost carrier Spirit Airlines last month lowered its third-quarter profit forecast, citing “increased promotional activities with steep discounts.” Frontier Airlines said it is under pressure to offer “very, very low” fares to fill its planes.
In contrast, Delta said demand for premium cabins continued to outpace demand for low-cost basic economy seats, which now make up less than 5% of seats.
“There is some pressure at the bottom of the price category. Someone else will have to figure that out,” says Bastian.
The strong quarter comes against a backdrop of softening domestic demand This raises questions about consumers cutting back on travel spending as household savings have been depleted, student loan repayments have resumed and high interest rates have begun.
Delta Director Ed Bastiaan cautioned against interpreting this as a broader trend in the sector. In an interview, he said demand for Delta’s products remains “high” because customers are in “very healthy condition.”
“Our domestic business is very strong,” he said. Shares of the US airline rose 2.4% before the bell.
However, a rise in fuel costs is putting pressure on the company’s profits. Delta now expects adjusted earnings of $6 to $6.25 per share this year, up from an estimated $6 to $7 per share in July. The company reported adjusted earnings of $2.03 per share for the third quarter, above analysts’ expectations of $1.95, according to LSEG data, helped by a 35% increase in international passenger revenue from a year ago.
Delta said demand for overseas travel has remained strong throughout the fall season.
For the December quarter, the airline expects adjusted earnings between $1.05 and $1.30 per share. That compares with the $1.11 estimated by Wall Street analysts.
It forecasts an adjusted operating margin of 9% to 11% in the fourth quarter, with revenue up 9% to 12% year over year.
The rush among travelers to make up for lost time during the pandemic has allowed U.S. airlines to ease inflationary pressures with higher fares.
However, airline fares are down double digits from a year ago. Ticket prices for holiday trips have also fallen.
Data from online travel agency Hopper shows that the average round-trip domestic flight for the Thanksgiving holiday next month is down 14% from last year. Similarly, fares for the Christmas travel season are 12% lower than a year ago.
Ultra-low-cost carrier Spirit Airlines last month lowered its third-quarter profit forecast, citing “increased promotional activities with steep discounts.” Frontier Airlines said it is under pressure to offer “very, very low” fares to fill its planes.
In contrast, Delta said demand for premium cabins continued to outpace demand for low-cost basic economy seats, which now make up less than 5% of seats.
“There is some pressure at the bottom of the price category. Someone else will have to figure that out,” says Bastian.
