Delta Air Lines on Thursday forecast record revenue for the third quarter because of booming summer travel demand, but its projection fell wanting analysts’ estimates as carriers discounted fares after expanding flights.
In the present quarter, Delta expects sales to rise not more than 4%, below the 5.8% growth analysts polled by LSEG estimated, and it forecast adjusted earnings per share of $1.70 to $2 a share, wanting the $2.05 a share analysts estimated.
Shares of Delta were down about 6% in mid-morning trading. Other major U.S. airlines were also trading lower.
The Atlanta-based carrier on Thursday kicked off an airline earnings season marked by packed planes but profits under pressure as costs rise and increased capability weighs on fares. The Transportation Security Administration said it screened greater than 3 million people for the primary time on Sunday at U.S. airports.
Delta is a standout within the U.S. airline industry as probably the most profitable carrier, and Thursday’s report is an indication that competitors, particularly those focused on the oversupplied U.S. air travel market, could struggle this summer.
Rival United Airlines, which is scheduled to report results next Wednesday is attempting to catch as much as Delta’s profitability, and each carriers have been racing so as to add more premium seats that fetch more revenue from consumers. Analysts have probably the most buy rankings on Delta and United compared with other U.S. airlines.
Here’s how Delta performed within the second quarter, compared with Wall Street expectations based on consensus estimates from LSEG:
- Adjusted earnings per share: $2.36 vs. $2.36 expected
- Adjusted revenue: $15.41 billion vs. $15.45 billion expected
For the three months ended June 30, Delta brought in adjusted revenue of $15.4 billion, up 5.4% from last 12 months and shy of Wall Street estimates. Net income dropped almost 30% from a 12 months ago to $1.31 billion, or $2.01 a share, with operating expenses up 10% from last 12 months. Adjusting for one-time items, Delta reported earnings of $1.53 billion, or $2.36 a share, in keeping with analysts’ estimates.
“The second quarter was a extremely strong performance,” CEO Ed Bastian said in an interview. “What you see happening is the impact within the domestic marketplace to the lower fare discounting that is been occurring this quarter.”
Airfare in June was 5.1% lower than a 12 months earlier and 5.7% lower than the month prior, in accordance with Thursday’s latest read on consumer prices, which showed easing inflation.
Bastian said lower industry capability within the U.S. toward the tip of the summer will higher match up with demand. Delta said that corporate travel continues to extend and that the majority customers expect to keep up or grow their corporate travel spending this quarter and after.
The carrier expects to grow its flying capability 5% to six% within the third quarter compared with last 12 months, a slower clip than the 8% it expanded within the second quarter. Bastian told CNBC that he expects Delta’s unit revenues to show positive over last 12 months in September.
Revenue from international travel has been strong for the reason that pandemic waned, though airlines have expanded schedules, meaning more competition for patrons. Unit revenue for trans-Atlantic flights will take a 1-percentage point hit from the Summer Olympics in Paris, Delta said. The impact is the same as about $100 million from June through August, Bastian told CNBC. The airline has more capability to the French capital than rivals through its partnership with Air France.
Delta reported growth in premium tickets, like those for top notch, jumped 10% within the second quarter to $5.6 billion, while revenue from coach tickets rose 0.3% to about $6.7 billion. Its lucrative American Express bank card deal brought in $1.9 billion, up about 9% from last 12 months.
Bastian said that Delta is “fairly well insulated” from industry overcapacity since it draws a lot of its revenue from premium seats and other sources quite than standard coach tickets.
Delta reiterated its full-year earnings forecast of $6 to $7 a share and said it still expects to generate free money flow of as much as $4 billion.
Disclosure: CNBC parent NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the U.S. broadcast rights holder to all Summer and Winter Games through 2032.
