Delta Airlines Red-hot travel demand led the company to report its highest-ever quarterly revenue and earnings after defying concerns about an economic slowdown for months.
International travel and demand for premium seats such as first class stood out in the second quarter, while Delta’s fuel costs fell 22%, boosting the company’s bottom line.
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The Atlanta-based airline on Thursday raised its 2023 profit forecast to an adjusted $6 to $7 a share, up from the upper end of a range of $5 to $6 a share forecast last month.
Chief Executive Ed Bastian said he expected consumers’ desire to travel to drive bookings over the next few years, calling the current period a “mid-term” of travel growth.
“I think the trends we’ve seen this year will continue,” he said in an interview.
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International demand remains strong for the fall, Bastian said, and he expects business travel bookings to grow slowly but steadily.
Delta Air Lines was the first U.S. airline to report second-quarter results, and its report set an upbeat tone for the rest of the year. united airlines and American airlines A report is due next week.
Delta expects third-quarter earnings per share of $2.20 to $2.50, topping analysts’ forecasts and a 16% increase in capacity. The operator expects revenue to rise 14% from a year earlier.
Here’s how Delta’s performance in the quarter ended June 30 compares to Wall Street expectations based on Refinitiv consensus forecasts:
- Adjusted earnings per share: $2.68, compared with $2.40 expected.
- Adjusted Income: $14.61 billion compared with expectations for $14.49 billion.
Transatlantic travel was particularly strong in the spring and early summer, with revenues from these trips up more than 60% year-over-year, while domestic revenues were up 8% and overall passenger revenues were up 21%. Delta and its rivals have increased capacity to Europe this year in response to the economic recovery. (Bastian told CNBC he recently traveled to the south of France.)
Premium fare revenue growth also outpaced economy class.
Unit revenue, a measure of how much an airline generates per seat per mile flown, rose 1% year-over-year, and capacity rose 17%.
“If you ask us in which quarter we grew double digits in capacity and we maintained our overall pricing, that would be pretty amazing,” Bastian said.
Overall, U.S. fares fell nearly 19% last month from a year earlier and were down 8% from May, according to the latest inflation data, as airlines ramped up service for the peak travel season.
Capacity constraints and strong demand pushed up fares last year, but “today we are in a normalized environment,” Bastian said. Delta’s pricing remains unchanged.
Delta’s net income for the quarter was $1.83 billion, or $2.84 a share, up from $735 million, or $1.15 a share, a year ago. Adjusting for certain items, earnings per share were $2.68, up from $1.44 a year earlier.
The airline’s net profit was the highest since the fourth quarter of 2013, when it put more than $8 billion in tax-loss credits back on its balance sheet.
For the three months ended June 30, Delta earned $14.61 billion in revenue (excluding refinery sales), up 19% from a year earlier and above analysts’ expectations. Total revenue was US$15.58 billion, up 13% year-over-year.
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