HomeBusinessDelta's summer outlook disappoints as industry's flight glut drives down fares

Delta’s summer outlook disappoints as industry’s flight glut drives down fares

Delta Air Lines Reports Record Revenue, but Falls Short of Analysts’ Estimates

Introduction

Delta Air Lines, one of the most profitable carriers in the US airline industry, reported record revenue for the third quarter due to booming summer travel demand. However, the airline’s projection fell short of analysts’ estimates as carriers discounted fares after flooding the market with flights.

Revenue and Earnings

Delta expects sales to rise no more than 4% in the current quarter, below the 5.8% growth analysts polled by LSEG estimated. The airline forecast adjusted earnings per share of $1.70 to $2 a share, short of the $2.05 a share analysts estimated. In the second quarter, Delta brought in adjusted revenue of $15.4 billion, up 5.4% from last year and shy of Wall Street estimates.

Industry Trends

The Transportation Security Administration (TSA) reported that it screened more than 3 million people for the first time on Sunday at US airports. This trend is expected to continue, with Delta expecting to grow its flying capacity 5% to 6% in the third quarter compared with last year. However, the airline industry is facing oversupply, with many carriers expanding their schedules, leading to discounted fares.

Competitors

Rival United Airlines, which is scheduled to report results next Wednesday, is trying to catch up to Delta’s profitability. Both carriers have been racing to add more premium seats that fetch more revenue from consumers. Analysts have the most buy ratings on Delta and United compared with other US airlines.

Financial Performance

Delta’s financials remain among the best in the industry, with the airline reporting growth in premium tickets, like those for first class, jumped 10% in the second quarter to $5.6 billion. Revenue from coach tickets rose 0.3% to about $6.7 billion. The airline’s lucrative American Express credit card deal brought in $1.9 billion, up about 9% from last year.

CEO’s Comments

CEO Ed Bastian said in an interview, "The second quarter was a really strong performance. What you see happening is the impact in the domestic marketplace to the lower fare discounting that’s been going on this quarter." Bastian also stated that lower industry capacity in the US toward the end of the summer will better match up with demand.

Conclusion

Delta Air Lines’ report highlights the challenges faced by the airline industry, including oversupply and decreased fares. Despite this, the airline’s financial performance remains strong, with growth in premium tickets and revenue from international travel. As the industry continues to evolve, it will be important for carriers to adapt to changing demand and find ways to increase revenue.

FAQs

Q: What was Delta Air Lines’ revenue for the third quarter?

A: Delta Air Lines reported record revenue for the third quarter, but the exact figure was not disclosed.

Q: Did Delta Air Lines meet analysts’ estimates?

A: No, Delta Air Lines’ projection fell short of analysts’ estimates, with the airline forecasting adjusted earnings per share of $1.70 to $2 a share, short of the $2.05 a share analysts estimated.

Q: What is the outlook for the airline industry?

A: The airline industry is facing oversupply, with many carriers expanding their schedules, leading to discounted fares. However, Delta Air Lines is expected to continue to perform well, with growth in premium tickets and revenue from international travel.

Q: What is the significance of the Transportation Security Administration’s report?

A: The Transportation Security Administration’s report indicates that summer travel demand is strong, with more than 3 million people screened at US airports on Sunday. This trend is expected to continue, with Delta Air Lines expecting to grow its flying capacity 5% to 6% in the third quarter compared with last year.

Q: What is the status of Delta Air Lines’ American Express credit card deal?

A: Delta Air Lines’ American Express credit card deal brought in $1.9 billion, up about 9% from last year. The deal is expected to continue to be a significant source of revenue for the airline.

Author: www.cnbc.com

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