Delta Airlines
It also marked Delta's first quarterly profit since the pandemic without taking federal aid into account. Overall, Delta's business has seen a significant improvement compared to last year but remains off 2019 levels by a decent amount.
Inside the Numbers
In Q3, Delta reported adjusted earnings per share of $0.30, beating expectations of $0.17 per share. Revenue came in at $9.15 billion vs $8.4 billion. Its Q3 profit of $1.2 billion was 19% lower than its 2019 Q3 profit, but it marked the company's first profit since the pandemic.
However, this positive result was overshadowed by the company's warning that more expensive fuel prices would lead to lower profits in Q4 offsetting improvements in travel demand. Overall, it expects costs, before fuel expenses, to increase by 6% to 8% in Q4 as it increases the volume of flights, going from 71% capacity to 80% capacity.
In terms of fuel prices, it expects an increase to between $2.25 and $2.40, an increase from $1.97 per gallon in Q3. Delta does anticipate a continued recovery in revenues to about 75% of 2019's Q4. It reported strong demand for "premium" seats which have been a source of earnings growth for airlines in recent years.
The overall environment for airlines looks challenging as demand improvements are offset by rising fuel costs. Additionally, spending on business travel and international flights remains depressed. Currently, business travel booking is at 50% of 2019 levels, up from 40% in the last quarter.
Stock Price Outlook
Another challenge that Delta faces is that travel demand has rebounded faster than anticipated which means they and other airlines are facing understaffing issues. They are going to have to find workers in a tight labor market probably by offering more pay and better benefits.
Ultimately, it means that investors should look at other travel stocks that aren't as negatively impacted by rising fuel prices as airlines.
