Delta Air Lines Posts Q3 Profit; Sees Q4 Earnings Above Market

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Delta Air Lines, Inc. reported Thursday a profit in its third quarter, lower than the pre-pandemic 2019. Revenues, however, increased on a two-year basis.

Looking ahead, the airline projects fourth-quarter adjusted earnings above market estimates, and higher revenues compared to 2019. The company also maintained its outlook for fiscal 2024. Delta has not given any comparison with the prior year.

In pre-market activity on the NYSE, Delta shares were gaining more than 4 percent to trade at $30.45.

Ed Bastian, Delta's chief executive officer, said, "The travel recovery continues as consumer spend shifts to experiences and demand improves in corporate and international. ...With strong demand and a return to best-in-class operational performance, we are ahead of our plan for the year on profitability and expect to be free cash flow positive. We're working towards full network restoration by summer of 2023.."

For the fourth quarter, Delta expects adjusted earnings per share of $1.00 to $1.25, operating margin of 9 percent to 11%, and total revenue growth of 5 percent to 9 percent compared to December quarter 2019.

On average, 15 analysts polled by Thomson Reuters expect earnings of $0.79 per share for the quarter. Analysts' estimates typically exclude special items.

Capacity is expected to be 91 to 92 percent restored to 2019 in the December quarter, and non-fuel unit costs are expected to be 12 to 13 percent higher, improving 10 points sequentially.

The company also said it is on track to achieve 2024 targets of over $7 adjusted earnings per share and $4 billion of free cash flow.

In its third quarter, net income was $695 million or $1.08 per share, down 54 percent from pre-pandemic fiscal 2019 net income of $1.50 billion or $2.31 per share.

Adjusted net income was $966 million or $1.51 per share, including a 3 cents impact from Hurricane Ian, while 2019 adjusted net income was $1.51 billion or $2.33 per share. Analysts expected earnings of $1.53 per share.

Operating income was $1.5 billion with an operating margin of 10.4 percent, and adjusted operating margin was 11.6 percent.

Operating revenue was $13.98 billion, 11 percent higher than $12.56 billion recorded two years ago.

Adjusted operating revenue was $12.84 billion, compared to $12.51 billion in the September quarter 2019. The Wall Street was looking for revenues of $12.87 billion for the quarter.

The company noted that adjusted revenue was 3 percent higher and unit revenues were up 23 percent compared to 2019, marking the highest revenue and unit revenue quarter in Delta's history.

Domestic passenger revenue was 2 percent higher and international passenger revenue was 97 percent recovered compared to the September quarter 2019.

International unit revenue growth outpaced domestic for the first time since the pandemic, and Transatlantic demand was driven by leisure destinations such as Italy, Spain and Greece and improving business demand.

Premium revenue was up 8 percent versus 2019, 10 points higher than the main cabin revenue growth.

The company said the impact of Hurricane Ian on September month revenue was $35 million, driven by cancellations and related booking softness to affected areas. A similar impact is expected in the month of October.

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