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Delta Airlines On Thursday, the company forecast record third-quarter revenue due to strong summer travel demand, but forecast a lower profit than analysts expected.
Delta Air Lines shares fell about 7% in premarket trading.
Here’s how the company performs in the space For the three months ended June 30compared to Wall Street expectations based on LSEG consensus estimates:
- Adjusted earnings per share: $2.36 vs expected $2.36
- Adjusted income: $15.41 billion vs. $15.45 billion expected
The Atlanta-based airline kicked off airline earnings season Thursday with packed planes but pressure on profits as rising costs and increased capacity weigh on fares.
The airline expects third-quarter capacity to increase 5% to 6% over last year, down from 8% growth in the second quarter.
Delta Air Lines’ adjusted revenue for the three months ended June 30 was $15.4 billion, a 5.4% increase from last year and lower than Wall Street’s expectations. Net profit fell nearly 30% from the same period last year to $1.31 billion, or $2.01 per share, and operating expenses increased 10% from last year. Adjusting for one-time items, Delta Air Lines reported profit of $1.53 billion, or $2.36 per share, in line with analysts’ expectations.
“The second quarter was very strong,” Chief Executive Ed Bastian said in an interview. “What you’re seeing is the impact of the domestic market on lower fare discounts for the season.”
Bastian said demand will be better met by reduced U.S. industrial capacity in late summer. Delta Air Lines said business travel continues to increase and most customers expect to maintain or increase business travel spending this quarter and beyond.
International travel revenue has been strong since the pandemic receded, even as airlines have expanded flight schedules, meaning more competition for customers. Delta Air Lines said unit revenue on transatlantic flights will be reduced by 1 percentage point due to the Summer Olympics in Paris. Bastian told CNBC the impact was equivalent to about $100 million. Through its partnership with Air France, the airline has more capacity to the French capital than its competitors.
Delta Air Lines expects to break more revenue records this season. The company said it expects sales to grow 4% and adjusted earnings per share of $1.70 to $2, below the $2.05 per share expected by analysts polled by LSEG.
Although the outlook is slightly lower than expected, Delta Air Lines remains the leader in the airline industry. It is the most profitable U.S. airline, several of which are struggling to turn a profit. competitors United AirlinesAirlines that report results next Wednesday are trying to catch up with Delta Air Lines, which has been racing to add more premium seats. Analysts have higher “buy” ratings on Delta Air Lines and United Airlines than any other U.S. airline.
Delta Air Lines reported that premium fares (like first-class fares) rose 10% in the second quarter to $5.6 billion, while economy fare revenue rose 0.3% to about $6.7 billion. its profitable American Express Credit card transactions brought in $1.9 billion in revenue, up about 9% from last year.
Bastian said Delta is “pretty well” insulated from industry overcapacity because it generates most of its revenue from premium seats and other sources rather than standard economy tickets.
Delta Air Lines reiterated its full-year profit forecast of $6 to $7 per share and said it still expects to generate up to $4 billion in free cash flow.
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