Delta’s quarterly profit nosedives as higher costs burn airlines
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Brace for landing… Delta Air Lines shares descended yesterday after the carrier kicked off airline earnings with disappointing quarterly #s. The good news: Delta’s revenue jumped to a Q2 record of $15.4B as more fliers splurged on premium seats. The bad: profit plunged 29% as Delta dealt with higher costs and a glut of extra seats on US flights. Delta’s expenses climbed 10% as fuel prices spiked and labor costs jumped after employee raises.
Budget brawl: Airfare prices are down 5% from a year ago, and Delta CEO Ed Bastian urged low-cost carriers to stop oversupplying seats on domestic routes. Delta’s “load factor,” aka the percentage of seats filled, slipped last quarter.
Business class: Delta’s lucrative corporate travel biz saw double-digit growth for the sixth straight month. International passenger revenue grew 4% as more Americans took off on “White Lotus”-style euro trips.
Emily not in Paris: Delta expects to take a $100M sales hit as Olympics-wary fliers avoid Paris, its biggest destination partner.
Hot sales, chilly profits… Delta’s results come as travel demand stays elevated: 3M fliers passed through TSA checkpoints on a single day this month — a record. This summer’s expected to be historic for air travel, with over half of Americans planning to fly at least once. But US airline profits have stumbled on higher labor costs and staffing issues. Officials say the industry is still short 3K air-traffic controllers, which has contributed to delays and cancellations.
Carriers are in a catch-22... The International Air Transport Association predicts the airline industry will earn a record $996B in sales this year. But total expenses are also expected to hit a record $936B. Because airlines already have thin margins, rising costs can have an outsize effect. The transport association’s director said airlines earn only about $6/per passenger — “barely enough for a coffee.”