Delta lowered its adjusted full-year earnings outlook to $5.10 to $5.60 a share from the July range of $6.50 to $7.50, reflecting higher fuel prices. The airline also trimmed its full-year free cash flow target to $2.5 billion, down from as much as $4 billion. CEO Ed Bastian said fares have continued to rise as the carrier passes through much of an approximately $6 billion jump in fuel costs this year, and bookings haven't slowed.
"The consumer response continues to be quite strong. We're seeing it across all channels, all cabins of service, all geographies, business, leisure," he said.
Delta, the country's most profitable airline, was first to post results for the busy summer quarter and missed Wall Street forecasts for the first time in two years. Adjusted earnings per share were $1.72, compared with the $1.75 consensus, and adjusted revenue was $17.59 billion versus $17.67 billion expected.
Net income fell to $756 million, or $1.15 a share, from $1.42 billion, or $2.17 a share, a year earlier, a 47% drop. Operating revenue rose 21% to $20.19 billion. After removing sales from the refinery, maintenance business and profit-sharing, revenue increased 16% to $17.59 billion. Premium revenue climbed 18% to $6.82 billion, while main cabin revenue grew 12% to $6.8 billion.
Delta also projected fourth-quarter revenue to be up 20% year over year on a basis that adjusts for the company's refinery in Trainer, Pennsylvania, which refines crude into jet fuel and other products. Even so, its fourth-quarter guidance came in below analyst expectations.
Airline guidance is a clean read on both fuel costs and travel demand. Market Briefs covers the sector free every weekday.
According to FactSet, U.S. Gulf of Mexico jet fuel was $4.34 on Thursday, versus $2.19 a year earlier, nearly a twofold increase. Following the start of the Iran war in February, rising energy costs have squeezed airline profits even as carriers exercise pricing power. The latest September inflation report showed airfare more than 23% higher than a year ago. Bastian acknowledged the backdrop, noting, "Obviously the fuel pricing, the volatility of fuel prices have something to do with that."
On the connectivity front, Delta said almost four years ago it would make Wi-Fi free across its fleet, and recently announced plans to add Amazon Leo satellite internet as airlines chase at-home streaming speeds in the sky. Last week on X, SpaceX CEO Elon Musk took aim at Bastian, declaring the Delta boss would "lose his job over this," after a post from the travel site View from the Wing said Bastian told employees during an internal event, "We do not want to be with Elon Musk. Trust me." Bastian played down any personal dust-up on CNBC, telling Phil LeBeau that "everyone's entitled to their opinion." SpaceX's Starlink Wi-Fi has become the leading satellite Wi-Fi provider, with airline partners that include United Airlines, American Airlines, Southwest Airlines and Alaska Airlines, plus others internationally.
Demand is holding up across cabins and regions, and premium seats are becoming a bigger slice of sales. But pricier fuel and broader costs are eating into profitability and cash generation, even as fares rise. If airfare is more than 23% above last year, that affects travel budgets while helping airlines cover higher inputs. The balance between strong bookings and tighter margins is the key dynamic to watch into year end.
Strong demand with high fuel is a margin problem, not a demand one. Join Market Briefs free and follow the numbers.
