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Delta Airlines The company said Thursday it expected third-quarter sales to hit a record high thanks to a surge in summer travel demand, but its profit outlook fell short of analysts’ expectations.
Delta shares fell about 8% in premarket trading.
Here’s how the company performed for the three months to June 30, compared with Wall Street expectations based on LSEG consensus estimates:
Adjusted earnings per share: $2.36 (expected: $2.36)Adjusted revenue: $15.41 billion (expected: $15.45 billion)
The Atlanta-based airline kicked off earnings season Thursday with a full fleet of planes, but profits are being squeezed by rising costs and higher fares due to more seats.
The company expects its third-quarter capacity to increase by 5 to 6 percent compared to last year, slower than the 8 percent increase in the second quarter.
For the three months ended June 30, Delta posted adjusted revenue of $15.4 billion, up 5.4% from a year ago and below Wall Street expectations. Net income fell nearly 30% from a year ago to $1.31 billion, or $2.01 per share, while operating expenses rose 10% from a year ago. Adjusting for one-time items, Delta reported profits of $1.53 billion, or $2.36 per share, in line with analysts’ expectations.
“Our second quarter was a really strong performance,” CEO Ed Bastian said in an interview. “We’re seeing the fare reductions that we took this quarter have an impact on the domestic market.”
Bastian said that as U.S. airline capacity decreases toward the end of the summer, Delta will be better able to match demand. Delta said corporate travel continues to grow and that it expects most customers to maintain or increase their corporate travel spending beyond this quarter.
International revenues have been strong since the pandemic subsided, but airlines are expanding their schedules, intensifying competition for customers. Delta Air Lines says its unit revenues from transatlantic flights will fall by 1 percentage point due to the Paris Summer Olympics. That impact will amount to about $100 million, Bastian told CNBC. Delta Air Lines has more capacity to the French capital than rival airlines thanks to its partnership with Air France.
Delta Air Lines is on track to set another record for profit this quarter. The airline expects sales to grow as much as 4% and adjusted earnings per share to be between $1.70 and $2, below the $2.05 per share expected by analysts surveyed by LSEG.
Despite the slightly lower-than-expected outlook, Delta Air Lines remains a standout in the airline industry. Among U.S. airlines that are struggling to turn a profit, Delta is the most profitable. Rivals United AirlinesUnited Airlines, which reports earnings next Wednesday, is trying to catch up with Delta Air Lines as the two companies race to add more premium seats. Analysts give both Delta and United more “buy” ratings than any other U.S. airline.
Delta Air Lines reported that sales of premium tickets such as first class rose 10% to $5.6 billion in the second quarter, while sales of economy class tickets increased 0.3% to about $6.7 billion. American Express Credit card transactions brought in $1.9 billion, up about 9% from last year.
Bastian said Delta is “fairly insulated” from industry overcapacity because it derives much of its revenue from premium seats and other sources rather than standard economy-class tickets.
Delta Air Lines reiterated its full-year profit guidance of $6 to $7 per share and said it still expects to generate as much as $4 billion in free cash flow.
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