The Atlanta-based carrier on Thursday kicked off an airline earnings season marked by full flights, but profits under pressure as costs rise and capacity increases on fares.
The carrier expects its flying capacity to grow 5% to 6% in the third quarter compared to last year, a slower clip than the 8% it expanded in the second quarter.
Here’s how the company fared For the three months ended June 30Compared to Wall Street expectations based on consensus estimates from LSEG:
- Adjusted earnings per share: $2.36 vs. $2.36 expected
- Adjusted Earnings: $15.41 billion and $15.45 billion expected
In the three months ended June 30, Delta brought in $15.4 billion in adjusted revenue, up 5.4% from a year ago and just shy of Wall Street estimates. Net income fell nearly 30% from a year ago to $1.31 billion, or $2.01 a share, while operating expenses increased 10% from last year. Adjusted for one-time items, Delta posted earnings of $1.53 billion, or $2.36 a share, according to analysts’ estimates.
“The second quarter was a very strong performance,” CEO Ed Bastian said in an interview. “You’re seeing what’s happening with the impact on the domestic market in the ongoing low-cost discounting this quarter.”
Bastian said the end of the summer would match up better with lower job demand in the United States. Delta said corporate travel continues to grow and most customers expect to maintain or increase their corporate travel spending this quarter and beyond.
Revenue from international travel has remained strong since the pandemic subsided, although airlines have expanded schedules, meaning more competition for customers. Unit revenue for trans-Atlantic flights will gain 1 percentage point from the Summer Olympics in Paris, Delta said. Bastian told CNBC that the impact equates to about $100 million from June to August. The airline has more capacity to the French capital than rivals through its partnership with Air France.
In the current quarter, Delta expects to break more revenue records. It said it expects sales to rise 4% and expects adjusted earnings of $1.70 to $2 a share, below the $2.05 a share analysts polled by LSEG had expected.
Although a little less than expected, Delta is a standout in the airline industry. It is the most profitable of US carriers, many of which struggle to turn a profit. Rival United Airlines, which will announce results next Wednesday, is trying to catch up to Delta, and both carriers are racing to add more premium seats. Analysts have higher “buy” ratings on Delta and United than most other U.S. airlines.
Delta reported growth in premium tickets for first class, up 10% to $5.6 billion in the second quarter, while revenue from coach tickets rose 0.3% to about $6.7 billion. Its lucrative American Express credit card deal generated $1.9 billion, up about 9% from last year.
Bastian said Delta is “pretty well insulated” from the industry’s overcapacity because it gets more revenue from premium seats and other sources than from standard coach tickets.
Delta reiterated its full-year earnings forecast of $6 to $7 a share and said it still expects free cash flow of up to $4 billion.
