US Markets
Thursday, July 11th, 2024 1:34 pm EDT
Key Points
- Delta Air Lines forecasted record third-quarter revenue due to high summer travel demand but fell short of analysts’ expectations, projecting a 4% sales increase compared to the 5.8% estimated and adjusted earnings per share of $1.70 to $2 versus the anticipated $2.05.
- Despite strong performance in the second quarter, Delta’s net income dropped nearly 30% from last year, with adjusted revenue slightly missing Wall Street estimates; shares fell about 9% in premarket trading amid rising costs and increased capacity affecting fares.
- Delta continues to see robust growth in premium ticket sales and revenue from its American Express credit card partnership, expecting to remain relatively insulated from industry overcapacity while maintaining its full-year earnings forecast and projected free cash flow.
Delta Air Lines projected record revenue for the third quarter, driven by strong summer travel demand, yet its forecast fell short of analysts’ expectations. Delta anticipates a sales increase of up to 4%, below the 5.8% growth estimated by analysts, and projected adjusted earnings per share of $1.70 to $2, less than the anticipated $2.05. This led to a 9% drop in Delta’s shares in premarket trading, affecting other U.S. airlines as well.
Despite a robust second quarter performance, Delta’s net income dropped nearly 30% to $1.31 billion, or $2.01 per share, with adjusted earnings at $2.36 per share, matching analyst predictions. Adjusted revenue for the quarter was $15.4 billion, up 5.4% from the previous year but slightly below Wall Street estimates. CEO Ed Bastian attributed strong results to high domestic travel demand, though lower fare discounting impacted the domestic market.
Airfare in June decreased by 5.1% from the previous year, contributing to easing inflation. Bastian predicted that reduced industry capacity towards the end of summer would better align with demand. Delta expects to expand its flying capacity by 5% to 6% in the third quarter, a slower rate compared to the 8% growth in the second quarter.
International travel revenue remained robust post-pandemic, although expanded schedules increased competition. Delta noted a 1-percentage point hit in trans-Atlantic unit revenue due to the Summer Olympics in Paris, equivalent to about $100 million from June through August. However, Delta’s partnership with Air France has provided more capacity to Paris compared to rivals.
Premium ticket sales, such as first-class, grew 10% in the second quarter to $5.6 billion, while revenue from coach tickets rose by a modest 0.3% to approximately $6.7 billion. Additionally, Delta’s partnership with American Express generated $1.9 billion, up 9% from the previous year. Bastian emphasized that Delta is relatively insulated from industry overcapacity due to its significant revenue from premium seats and other sources beyond standard coach tickets.
Delta reiterated its full-year earnings forecast of $6 to $7 per share and maintained its expectation to generate up to $4 billion in free cash flow. The airline’s profitability and strategic positioning with premium offerings and partnerships, like the one with American Express, underline its resilience and potential for sustained growth amidst market fluctuations and competitive pressures.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/11/delta-air-lines-dal-earnings-q2-2024.html
