Delta Air Lines (DAL) announced record revenue for the June quarter on Thursday, but earnings fell short of analyst estimates due to lower tickets.
Here’s how Delta performed in the second quarter compared to consensus estimates compiled by Bloomberg.
- Adjusted net income: $1.528 billion vs. $1.531 billion expected
- Adjusted earnings per share: $2.36 vs. $2.38 expected
- Revenue: $15.41 billion vs. $15.44 billion expected
Delta CEO Ed Bastian reported that summer travel demand was “very, very healthy,” resulting in the company’s second-highest earnings performance after Q2 2023. However, he recognized that some customers are growing increasingly price-conscious.
“Our second quarter was really strong,” Bastian remarked. “As we look ahead to the third quarter, we anticipate another excellent quarter. The domestic marketplace is where price sensitivity is beginning to emerge, particularly in the lower fare buckets.
The company maintained its full-year earnings guidance of $6 to $7. Delta forecasts third-quarter earnings to be in the $1.70 to $2.00 range, down from the $2.03 posted in the same quarter last year.
Meanwhile, air travel demand continues to reach unprecedented heights. According to TSA passenger throughput data, the number of people flying in 2024 is up 6% over 2023, with an average of 145,860 more customers per day.
“Our consumers are driving the experience economy,” said Bastian, “whether it’s traveling to Europe to see a Taylor Swift concert or going to see friends in another part of the country — that’s driving a tremendous amount of our stability.”
Delta shares was down nearly 8% in premarket trade on Thursday. Year to date, the airline operator’s stock has increased by more than 16%.
Airfare and international expansion
Despite increased travel, ticket prices are falling, which may slow the airline industry’s profit growth.
Heading into the prime summer travel season, US flight costs fell 5.9% in May compared to the previous year.
Increased capacity has helped to reduce fares. Another factor to consider is where people choose to travel.
According to Bloomberg Intelligence, travel to Latin and South America is likely to reach post-pandemic highs in the second and third quarters, with 30%-40% more travel than in 2019.
“That’s likely to put pressure on fares and profit,” Bloomberg Intelligence senior industry analyst George Ferguson wrote in a May study.
Delta has increased its routes to and from Latin American, Caribbean, and South American markets. Its Latin American segment was a key driver of the 4% revenue growth in international travel during the quarter, as the airline operator sought to fill in gaps on its network.
“While that region has been … a bit slow to recover from COVID over the last couple of years, it’s been recovering quite well,” Bastian said the media. “We’re happy with that because we realize that those are markets [where] our market share opportunities are pretty important to us, and we want to capitalize on them.”
“But it also drives pricing down as, again, all the capacity comes back and … [has] what is certainly a price-sensitive consumer in that range,” said Bastian.
Days before reporting earnings, Delta announced another overseas alliance with Riyadh Air, as part of its newest strategic expansion. The operators will be each other’s sole partners for clients flying between North America, the Kingdom of Saudi Arabia, and connecting cities.
“The first flights will begin next summer,” Bastian announced. “I was able to spend several days in Riyadh a couple of months ago to learn for myself and witness what was going on on the ground. And it was very astounding the level of transformation in all elements of that industry… from a people perspective… to a big $800 billion investment in tourism across the Saudi Arabian Arabian peninsula that is being pushed out of Riyadh.”