Delta Air Lines has revised its profit outlook downward due to surging fuel costs, marking a significant challenge as the airline has failed to meet Wall Street's earnings expectations. Despite these challenges, CEO Ed Bastian remains optimistic about demand, noting that higher fares have not deterred travelers.
On Friday, Delta projected its full-year earnings per share to range between $5.10 and $5.60 on an adjusted basis. This is a significant drop from its July forecast of $6.50 to $7.50 per share, when fuel prices were lower. The airline also lowered its free cash flow outlook for the year to $2.5 billion, down from the $4 billion anticipated in July.
Bastian emphasized that the airline has managed to pass on much of the $6 billion increase in fuel costs to consumers, who continue to book flights across all channels, cabins, and geographies. He highlighted robust demand in both business and leisure travel sectors.
Delta anticipates a 20% revenue increase in the fourth quarter compared to the same period last year, surpassing the 16% rise seen in the third quarter. This growth is partly attributed to the airline's refinery in Trainer, Pennsylvania, which refines crude oil into jet fuel, providing Delta with a competitive edge over other carriers.
The airline, which is the most profitable in the United States, is the first to report third-quarter results, covering the busy summer travel season. However, rising costs, particularly due to fuel price volatility since the Iran war began in February, have impacted profits. September's inflation data showed a more than 23% increase in airfare from the previous year, reflecting the industry's pricing power amid these challenges.
Third-Quarter Financial Performance
Delta's third-quarter financial results revealed a net income of $756 million, or $1.15 per share, a 47% decline from $1.42 billion, or $2.17 per share, a year earlier. After adjusting for one-time items, the airline reported earnings of $1.76 per share. Revenue, excluding sales from its refinery, maintenance business, and profit-sharing, rose 16% from the previous year to $17.59 billion. Operating revenue increased by 21% in the third quarter, reaching $20.19 billion.
Premium revenue, which now constitutes a larger portion of Delta's total sales, grew 18% in the third quarter to $6.82 billion. In contrast, main cabin sales saw a 12% increase, totaling $6.8 billion. These figures underscore the airline's ability to capitalize on premium offerings despite economic headwinds.
