Delta Air Lines reported a 60% increase in profit for the third quarter, thanks to strong travel demand, particularly for international trips. The airline, however, revised its full-year earnings estimate to the lower end of its previous forecast due to a surge in fuel prices.
In its quarterly report, Delta announced that it expects adjusted earnings of $6 to $6.25 per share for the full year, down from its previous forecast of $6 to $7 per share. The airline also revised its free cash flow estimate for the year to $2 billion from the previously predicted $3 billion.
Despite the revision in earnings, Delta remains optimistic about solid travel demand in the last quarter of the year. The company estimates that revenue will increase by 9% to 12% compared to the same period in 2022. CEO Ed Bastian stated, “We expect many of the same trends to continue in the fourth quarter,” referring to the strong travel demand. However, he also acknowledged the short-term pressure on fuel prices.
Delta, along with other airlines, has recently trimmed its third-quarter forecasts due to the rise in fuel prices. Bastian noted, “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.”
Despite the challenges posed by fuel costs, Delta performed well in the third quarter compared to Wall Street expectations. The airline reported adjusted earnings per share of $2.03, surpassing the expected $1.95. Adjusted revenue came in at $14.55 billion, almost in line with the expected $14.56 billion.
Delta’s strong performance can be attributed to the high demand for international trips, especially trans-Atlantic travel. Revenue from these flights increased by 34% in the third quarter compared to the previous year. Additionally, the airline saw a surge in demand for premium seats, such as business class or premium economy. Main cabin revenue and premium product sales rose by 12% and 17%, respectively.
Bastian highlighted the success of Delta’s premium product, stating, “I know the lower-fare airlines are having some challenges, but our premium product, especially domestically, is doing very, very well.” He also mentioned that business travel has recovered to over 80% of 2019 levels.
In addition to its financial performance, Delta recently faced criticism from customers regarding changes to its frequent flyer program and access to airport lounges. After experiencing long entry lines, the airline announced that it would make it harder to earn elite frequent flyer status and scale back access to lounges. However, Bastian acknowledged the customer backlash and stated that changes to those policies might be announced in the coming days.
Delta’s competitors, United Airlines and American Airlines, are set to report their third-quarter results next week. As the aviation industry continues to navigate challenges like fuel prices, these reports will shed further light on the state of the industry and the recovery from the pandemic.