Delta Air Lines Demand Is So Strong ‘There Is A Fight To Get On The Airplane,’ CEO Says

Delta Air LinesDAL
said Wednesday the second quarter was profitable despite rising costs and lower capacity, and forecast a profitable third quarter as well. It also promised to restore reliability that was lost in the early summer.

Post-pandemic demand remains strong, CEO Ed Bastian said early Wednesday on CNBC, noting “That’s not going to be quenched with a strong summer season.” Asked whether high fares will decline, he said, “Demand is really high – that’s what’s driving fares.”

During the mask mandate period, passengers fought on airplanes. Today, Bastian said, “There is a fight to get onto the airplane.”

As for the early summer’s poor operations, Bastian said, “Through the pandemic, Delta was known as the airline of choice. We had a rough start, no question about that. (But) we’re going to get back. We’re already back. “

The first airline to report second quarter earnings said it will adjust the operational issues that have plagued it and other carriers through an early summer of thunderstorms and overenthusiastic crew scheduling.

So far in July, Delta’s completion factor has been 99.2%, with 84% of flights arriving within 14 minutes of schedule, the carrier said, noting that it is boarding domestic flights sooner and modifying schedules at its largest hubs.

During the quarter ending June 30, operating revenue was $13.8 billion, up 10% from the same quarter in 2019. Analysts had estimated $13.3 billion. Operating income was $1.5 billion. Analysts had estimated $1.6 billion.

Delta missed earnings per share estimates, leading to a pre-market decline in the share price. Adjusted earnings per share were $1.44. Analysts had estimated $1.64. “We are maintaining our Market Perform and expect the shares to be under pressure this morning,” Cowen analyst Helane Becker wrote Wednesday in a note immediately after the earnings report. Shares closed Tuesday at $31.09. In pre-market trading, shares were down $1.25 or about 4%.

During the second quarter, “We recaptured higher fuel prices and delivered adjusted revenue recovery of 99% with unit revenues up 20.5 % versus 2019,” said President Glen Hauenstein, in a prepared statement. “We also delivered another record quarter of American ExpressAXP
co-brand remuneration, up 35% from the June quarter 2019, reflecting growing brand preference and further diversification of our revenue base.”

For the current quarter, Delta expects revenue to be up 1% to 5% from the 2019 level. The carrier sees “sustained strength in bookings (with) total unit revenue growth improving sequentially,” Hauenstein said.

Third quarter revenue is expected to increase despite a capacity decline of 15% to 17% and a 22% increase in costs excluding fuel, based on the July 8^th Brent fuel cost at $107 a barrel.

In the June quarter, domestic revenue was 3% higher than the same quarter of 2019, while international revenue was at 81% of the 2019 level. Revenue in Latin America and Transatlantic both exceeded 2019 levels, while the pace of recovery in the Pacific saw meaningful improvement, driven by Korea and Australia re-openings and the easing of restrictions in Japan, Delta said.

Business travel also improved. Domestic corporate sales for the quarter were at 80 % of the 2019 level, up 25 points compared to the March quarter.