A big factor is increasing U.S. travel to Europe as domestic travelers take advantage of the strong dollar. Currently, Delta's focus is on getting back to pre-pandemic capacity levels especially as international and business travel recover.
YTD, Delta's shares are down 20%. Despite strong earnings reports, travel stocks are down due to an expectation that travel spending will decline as economic conditions deteriorate. However, market participants should be open to the possibility that travel spending remains strong in the post-pandemic environment.
Inside the Numbers
In Q3, Delta Airlines reported adjusted earnings per share of $1.51 which was just short of expectations of $1.53 per share. Revenue also came in just under expectations at $12.84 billion vs expectations of $12.87 billion. However, this was 3% above 2019's Q3 despite fewer flights operating due to higher fares.
In the conference call, management was quite positive about travel remaining strong into year-end despite a host of challenges. This includes continued growth in international markets which are still running at below pre-pandemic levels. It's also confident that some of the scheduling and staffing issues are in the past which led to disruptions in its flight schedule.
In Q4, the company expects earnings per share between $1 and $1.25, and it anticipates revenue that would be around 7% higher than pre-pandemic levels. It also sees capacity returning to 92% of pre-pandemic levels and beyond 100% capacity by next summer.
However, one challenge is the surge in labor and fuel prices, resulting in total Q3 costs of $3.3 billion, a 48% increase from 2019. Not counting fuel, costs were up 23%.
The company noted that it incurred about $35 million in lost revenue due to Hurricane Irma. It said that business travel and international travel are the last 2 segments to a full recovery with both at around 80%.