Delta AirLines see strong demand for international travel during the fourth quarter of 2023. However, rising fuel costs can eat into the company’s profits.
In their latest update, Delta Air Lines (NYSE: DAL) reported that their profits jumped by a staggering 60% during the third quarter (Q3 2023) as the travel demand remained strong during the summer. This was particularly true for international trips, said the airline operator.
However, Delta Air Lines noted that the full-year earnings will remain at the lower end of the earlier estimates amid the surge in fuel prices. For the quarter ending September 30, Delta Air Lines reported adjusted earnings per share of $2.03, exceeding the expected $1.95. Also, the adjusted revenue for the third quarter was in line with the expectations at $14.6 billion.
This marks a 13% year-over-year increase and aligns with analysts’ predictions. Net income for the quarter amounted to $1.11 billion, or $1.72 per share, reflecting a substantial 59% growth from the $695 million, or $1.08 per share, reported during the same quarter the previous year. When adjusted for third-party refinery sales and other items, the company’s earnings per share reached $2.03 for the quarter.
In its quarterly report released on Thursday, Delta revised its full-year earnings projection, anticipating adjusted earnings of $6 to $6.25 per share. This adjustment came after an initial forecast of $6 to $7 per share in July. Furthermore, Delta reduced its annual free cash flow estimate from the $3 billion forecasted in the summer to $2 billion.
Despite these adjustments, Delta remains optimistic about robust travel demand in the final quarter of the year. The airline foresees a revenue increase of 9% to 12% compared to the same quarter in 2022. Per-share earnings for this period are projected to range from $1.05 to $1.30, aligning with market estimates. Speaking to CNBC Delta Air Lines CEO Ed Bastian said:
“We expect many of the same trends to continue in the fourth quarter. Obviously, there’s some short-term pressure on fuel as fuel rose quickly in the third quarter and stayed relatively high into the fourth quarter”.
Delta Airlines Says Demand for Overseas Flights High in Q3 2023
Along with other global airlines, Delta noted a substantial surge in demand for international travel, particularly trans-Atlantic flights. This led to a remarkable 34% increase in revenue for these routes during the third quarter compared to the previous year.
Despite an increase in both domestic and international capacity, Delta’s planes maintained a high occupancy rate, with an 88% load factor in the quarter. This figure is 1 percentage point higher than the same period in the previous year. Nevertheless, unit revenue from passengers experienced a 1.5% year-over-year decline, partly attributed to decreasing airfares as airlines expanded their flight schedules.
Additionally, Delta reported a significant rise in demand for premium seats, such as business class or premium economy. Main cabin revenue reached $6.62 billion, marking a 12% increase compared to the previous year, while sales for premium products soared by 17% to $5.11 billion.
Delta’s CEO, Ed Bastian, emphasized the robust performance of their premium offerings, particularly within domestic travel. He also noted that business travel has impressively rebounded, with more than 80% recovery to 2019 levels.
Delta faced some backlash from customers in the previous month when it unveiled changes that would make it more challenging to attain elite frequent flyer status and reduce access to its popular airport lounges due to long entry lines. Bastian later acknowledged that these policies might have gone “too far” and indicated that modifications would be made in response to customer feedback.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
