Delta Air Lines announces third quarter results

Delta Air Lines announced better-than-expected third-quarter results on Thursday. CEO Ed Bastian, president Glen Hauenstein and chief financial officer Dan Janki addressed investors and journalists on a call following the report.

They signaled strong growth in the airline’s premium cabins, but also pointed to some potential clouds on the horizon for Delta, including rising fuel costs and ongoing problems in the jet parts supply chain.

Year-to-date through Wednesday’s close, the company’s shares were up 9.5% compared with 13% for the benchmark S&P 500 index. All but one of 22 analysts covering the stock recommended a “buy” ahead of the earnings announcement, Bloomberg reports.

Still, as management spoke on the call, Delta’s stock fell after it released a new full-year earnings forecast that was closer to the lower end of the previous forecast.

Delta confirms it will modernize its SkyMiles program.

Delta confirms it is listening to customers who have been outraged by changes made to its SkyMiles loyalty program.

CEO Ed Bastian says he agrees with some of the sentiment about the changes to SkyMiles.

He doesn’t announce what those changes might be, but says people should stay updated – that the airline has listened to feedback and is adapting the modernization.

Bastian said some changes to the SkyMiles program will still be made. However, it says there will be “modifications” to the changes that were part of the original announcement.

A revamped SkyMiles program would focus more on how much customers spend rather than how much they fly, which is what American Airlines has done with its AAdvantage program. It apparently intends to adjust some of these changes, but the airline is not yet ready to announce the details.

Delta pays no attention to Ozempic.

A Wall Street Journal reporter asked Delta Air Lines whether it is considering Ozempic and other weight-loss drugs in its future plans.

Some reports say that if more people take weight loss drugs, it could mean that the average passenger weighs less. Since lighter aircraft are cheaper to fly, this can increase airline profits.

But Delta wasn’t thinking about that yet, in a phone interview Thursday.

Is Delta considering Ozempic? “No, no,” Bastian said.

Delta says business travel is starting to come back – especially in the technology and financial services sectors.

Delta says corporate travel is growing strongly in the technology and financial services sectors – something Bastian says is happening as companies work their way to a post-Covid “new normal.”

He says Delta is in a better position to meet increased demand from business travelers because of its differentiated product: That is, business travelers are more likely to buy premium seats on Delta compared to budget single-class carriers like Southwest and Allegiant .

Still, Bastian says entertainment industry strikes in Los Angeles – where Delta maintains a strong presence – and auto industry strikes in Detroit, where it also maintains a strong presence – are impacting the airline. Delta says business is still strong at these two hubs, but the strikes have definitely impacted travel.

Delta’s premium products, such as its Delta One service, are leading the way, says its CEO.

Big spenders are boosting Delta’s bottom line, with revenue from premium products like Delta One up 17% compared to the same quarter last year, according to the airline’s CEO.

That’s 5 percentage points higher than the main cabin, says Delta president Glen Hauenstein.

That means big spenders are even more important to the airline, especially as companies insist on returning to the office. As more and more employees return to the office, they will likely return to the skies for business trips as well. And many business trips take place in a premium cabin.

Employees who continue to have the ability to work from anywhere will likely continue to positively impact Delta’s bottom line through “holiday travel” – combining work with fun – creating demand that didn’t exist pre-Covid.

At the beginning of the company’s earnings announcement, Delta’s CEO admitted that “a war in Israel is developing.”

Delta Air Lines CEO Ed Bastian begins the conversation by admitting there is a “war” in Israel and announcing that the airline is donating $1 million to the American Red Cross. It says inbound and outbound flights to Tel Aviv have been suspended until the end of the month. He calls the events “tragic and terrifying.”

Delta shares are rising slightly after third-quarter results.

Delta shares rose 0.1% in early trading Thursday after its third-quarter earnings report. The company’s stock is currently up 9.7% year-to-date.

Delta beats estimates, lowers earnings prospects.

Third quarter

• Adjusted EPS of $2.03 vs. $1.51 YoY, estimates of $1.94

• EPS $1.72 vs. USD 1.08 y/y

• Adjusted revenue $14.55 billion, +13% y/y, estimated $14.55 billion

  • Passenger revenue $13.12 billion, +14% y/y, estimated $13.08 billion

  • Cargo revenues USD 154 million, -36% y/y, estimated USD 199.1 million

• Passenger load factor 88% vs. 87% y/y, estimates 86.9%

• Available local miles 73.23 billion, +16% y/y, estimate 73.14 billion

• Passenger miles revenue 64.10 billion, +17% y/y, estimate 63.53 billion

• Adjusted net income $1.31 billion, +35% y/y, estimated $1.25 billion

• Profitability per passenger mile 20.47c, -2.2% y/y

Forecast for the entire year 2023

Source: Bloomberg

Delta’s consensus estimate for third-quarter adjusted EPS is $1.94.

Third quarter

• Adjusted EPS estimate of $1.94 (Bloomberg consensus)

• EPS estimates $1.94

• Adjusted revenue estimates of $14.55 billion

• Estimated passenger load factor 86.9%

• The number of available seat miles is estimated at 73.1 billion

• Revenue from passenger miles flown is estimated at 63.5 billion

• Adjusted net income is estimated at $1.25 billion

All year 2023

Source: Bloomberg

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