Delta is returning to profitability, but rising fuel prices could bring new losses

The company made $ 194 million in the quarter, adjusted for special items. That’s less than $ 1.5 billion it made in the quarter of 2019, the year before the pandemic uprooted air travel around the globe.

But the final quarter was a lot better than the losses it and other airlines have reported since early 2020. Deltas (FROM) Operating losses during the pandemic were $ 9.8 billion at the beginning of this quarter.

“Our September quarter was an important milestone in our recovery,” said CEO Ed Bastian, but cautioned that the gains could be short-lived.

“As demand continues to improve, the recent hike in fuel prices will put pressure on our ability to remain profitable in the December quarter,” he said.

After labor costs, fuel is the second largest cost to an airline. Delta paid an average of $ 1.94 a gallon for fuel in the third quarter – 55% more than a year ago, but about the same price as it was two years ago. However, the company cautioned against paying an average of between $ 2.25 and $ 2.40 per gallon for the current quarter.

The company reported net income for the second quarter, but this was mainly driven by a final grant from government support and other airlines during the quarter.

Summer travel

Delta and other US carriers had a strong summer travel season as the backlog of vacation travel filled the planes. Delta occupied 80% of its available spots during the quarter, just below the 88% it reported in the same period of 2019.

However, a major contributor to the overcrowded airplane seats is that Delta is still well below the number of flights it flew two years ago. The airline’s total capacity decreased 28% in the quarter from the same time in 2019, with much of the reduction coming from international routes. Domestic capacity decreased by 16%.

Still, Delta’s 2021 schedule is comparatively much closer to its pre-pandemic schedule than it was during 2020, when capacity was only half what it was before the crisis.

Limited capacity and high demand for vacation travel contributed to a recovery in air travel costs. The average amount passengers paid to fly per mile for the quarter was only 2% below 2019 levels.
That was an impressive result considering that two of the most lucrative forms of travel – business travel and international travel – were still a fraction of what it was before the pandemic. Total prices so close to pre-pandemic levels mean the average leisure travel ticket is higher than it was before the pandemic.

The airline’s total revenue for the quarter decreased 27% from 2019 to $ 9.2 billion. The airline flew less than half of its pre-pandemic flight schedule on transatlantic and transpacific routes, although international flights to and from Latin America were within 7% of pre-pandemic levels.

delta (FROM) is the first major airline to publish quarterly results. The stock fell slightly in pre-trading hours after the warning about the fourth quarter results.

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