Delta’s Strong Q3 Performance
Delta AirLines experienced 60% increase in profits during the third quarter, benefiting from sustained strong travel demand, especially for international trips throughout the summer. However, the carrier anticipates full-year earnings to align with the lower range of its earlier estimate due to a rise in fuel prices.
Fuel Price Challenges:Jet fuel prices as tracked by the Energy Information Administration (EIA) averaged $3.07 per gallon at the end of August, up 50% from a recent low of $2.05 in early May.
In its recent announcement, Delta has adjusted its full-year earnings projection to fall within the range of $6 to $6.25 per share, a revision from its previous forecast of $6 to $7 per share made in July. Additionally, the airline has revised its free cash flow estimate for the year, reducing it from the previously forecasted $3 billion in the summer to $2 billion.
Despite these adjustments, Delta remains confident in the travel sector, with expectations of robust demand for the last quarter of the year. The airline foresees a substantial revenue growth of 9% to 12% in comparison to the same quarter in 2022. Per-share earnings for this period are estimated to range between $1.05 and $1.30, in line with market expectations.
In recent weeks, Delta, along with other airlines, adjusted their third-quarter forecasts due to a surge in fuel prices. Delta’s performance in the three months ending September 30, compared to Wall Street expectations based on consensus estimates from LSEG (formerly known as Refinitiv), is as follows:
- Adjusted earnings per share: $2.03, surpassing the expected $1.95.
- Adjusted revenue: $14.55 billion, very close to the expected $14.56 billion.
Delta achieved adjusted revenue of nearly $14.6 billion during this period, reflecting a 13% year-over-year increase and aligning with analysts’ projections.
The net income for the quarter stood at $1.11 billion, or $1.72 per share, showing a remarkable 59% rise from the $695 million, or $1.08 per share, recorded in the same period the previous year. Adjusted for third-party refinery sales and other factors, the company earned $2.03 per share during the quarter.
United Airlines and American Airlines are scheduled to report their third-quarter results next week.
Delta, alongside other global airlines, has experienced a significant upswing in demand for international travel, particularly trans-Atlantic routes. Revenue from these flights increased by 34% in the third quarter compared to the previous year.
Despite added capacity both domestically and internationally, Delta’s planes operated at 88% capacity in the quarter, up by 1 percentage point compared to the same period in the prior year. Passenger unit revenue decreased by 1.5% year over year, reflecting the decline in airfares as airlines expanded their schedules.
In addition to the surge in international travel, Delta noted a substantial rise in demand for premium seating, such as business class and premium economy. Main cabin revenue reached $6.62 billion, marking a 12% increase year-over-year, while premium product sales surged by 17% to $5.11 billion.
Delta President Glen Hauenstein mentioned that strikes in the entertainment and automotive sectors have impacted demand from those industries.
Delta faced criticism from customers last month when it announced changes to earning elite frequent flyer status and access to airport lounges. Delta’s CEO, Ed Bastian, acknowledged that these changes might have gone “too far” and hinted at potential adjustments in the “coming days.”