Delta Air Lines, Inc. (NYSE:DAL) stock fell 2.60% (As on July 14, 11:48:26 AM UTC-4, Source: Google Finance) after the company record quarterly sales and profits on the back of booming travel demand following the Covid-19 pandemic. The carrier’s bottom line was further boosted by a nearly one quarter drop in its fuel costs. Delta’s air traffic liability, reflecting future bookings, at the end of the April-June quarter was $10.4 billion, up $500 million from a year ago. Carriers typically rely on big-spending corporate customers to fill high-margin seats after the summer travel season, but recovery in corporate travel remains sluggish. Delta’s total revenue per seat mile (TRASM), a proxy for pricing power, was up 1% in the second quarter from a year ago despite a 17% jump in capacity.
DAL in the second quarter of FY 23 has reported the adjusted earnings per share of $2.68, beating the analysts’ estimates for the adjusted earnings per share of $2.40, according to analysts in a Refinitiv survey. The company had reported the adjusted revenue growth of 19 percent to $14.6 billion in the second quarter of FY 23. Passenger revenue rose 21% to $13.21 billion, while cargo sales fell 37% to $172 million. Total operating expenses increased 6% to $13.09 billion, with a 22% decline in aircraft fuel costs partially offsetting higher salaries. International passenger revenue rocketed 61% “with record profitability,” while transatlantic performance was driven by strong US consumer demand, particularly to southern European destinations. Domestic passenger revenue was up 8% on an annual basis.
Delta now expects adjusted earnings of $6-$7 per share this year, compared with its previous forecast of $5-$6 per share with sales seen rising by 17-20%. In the quarter through September, the company estimates earnings in the range of $2.20-$2.50 per share. That’s higher than the $2.07 expected by Wall Street analysts. Revenue in the quarter is estimated to be up between 11% and 14% from a year ago. Delta expects non-fuel costs to decline by 1% to 3% in the third quarter from a year ago. Guidance for full-year free cash flow of $3bn meanwhile was reiterated. The company is on track to reduce leverage to 3x by the end of this year and achieve investment grade metrics in 2024.
The urge to travel has sent bookings at U.S. carriers soaring. But with higher borrowing costs and high inflation stretching household budgets, questions linger about the sustainability of consumer spending.