Delta forecasts record Q4 profit on improved pricing, strong holiday bookings

DELTA Airlines said on Thursday (Oct 10) that the current quarter has shaped up to be one of the most profitable fourth quarters in its history, with improved pricing power and strong holiday travel bookings.

However, the Atlanta-based carrier said the upcoming US presidential election was expected to slow travel spending temporarily, and hurt its revenue

Delta has forecast an adjusted profit of $1.60 to $1.85 per share in the quarter ending Dec 31; analysts expected the adjusted profit to come in at US$1.71 a share, LSEG data showed.

“With an improving industry backdrop and strong demand for travel on Delta, we are positioned to finish the year strong,” chief executive officer Ed Bastian said.

The carrier added that the measures taken by US airlines to moderate capacity improved its pricing power across all geographies in the third quarter. It expects the trend to continue in the December quarter.

An excess supply of airline seats in the domestic market during the summer travel season had forced carriers to discount fares to fill their planes, hurting their earnings.

Since then, US airlines have moderated capacity. Annual domestic seat growth has slowed to 1.5 per cent in October and November, from 5.5 per cent in July, Bank of America analysts noted.

Capacity adjustments, as well as a 25 per cent year-on-year decline in jet fuel prices in North America have bolstered the industry’s earnings outlook, driving up airline shares.

The NYSE Arca Airline index has risen 25 per cent since early August, outpacing an 8 per cent jump in the S&P 500 index. Delta’s shares have also gained 34 per cent.

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The US carrier expects the Nov 5 presidential election to shave one percentage point from its unit revenue in the December quarter. Its overall revenue is estimated to be up 2 to 4 per cent in the quarter from a year ago, on the back of a 3 to 4 per cent increase in capacity.

Delta reported an adjusted profit of US$1.50 per share in the September quarter, lower than the US$1.52 estimated by analysts. Its earnings in the third quarter suffered due to mass flight cancellations following a global cyber outage.

A software update in July by global cybersecurity firm CrowdStrike triggered system problems for Microsoft customers, including many airlines. The disruptions persisted at Delta even as they subsided the next day in other major US airlines.

Delta cancelled about 7,000 flights over five days, disrupting the travel plans of 1.3 million customers. On Thursday, the company said the disruptions led to a 45-cents-per-share hit to its third-quarter earnings. REUTERS