Delta Air Lines kicked off the third-quarter earnings season by expressing optimism for the rest of the year, even after reporting lower adjusted net profit following a technology outage in July.
Unadjusted net profit at the Atlanta-based carrier rose 15% to $1.27 billion, from $1.11 billion during the same three-month period a year ago as revenue climbed to $15.7 billion. That is up just slightly from the same three-month period last year, the company says.
That said, adjusted for the outage as well as ”third-party refinery sales and unrealised gains/losses on investments:” profit dropped more than a quarter to $971 million. The CrowdStrike technology outage in mid-July forced thousands of flight cancellations and snarled air traffic for days. In August, the company had already said it would experience a negative impact on the quarter’s earnings.
”The direct revenue impact of the incident was approximately $380 million, primarily driven by refunding customers for cancelled flights and providing customer compensation in the form of cash and SkyMiles,” Delta says. ”The non-fuel expense impact was $170 million, primarily due to customer expense reimbursements and crew-related costs. Fuel expense was $50 million lower than it would have been as a result of the 7,000 flight cancellations over the five-day period.”
Despite the setback, the company is looking towards the end of 2024 with optimism as it expects a “record” fourth quarter.
“With an improving industry backdrop and strong demand for travel on Delta, we are positioned to finish the year strong,” says chief executive Ed Bastian. “We expect our December quarter pre-tax profit to grow 30% over last year to $1.4 billion, which would mark one of the most profitable fourth quarters in our history.”
During the third quarter, adjusted pre-tax income came in at $1.3 billion.
“Through the September quarter, unit revenue growth improved sequentially in all geographic entities, reflecting an improved equilibrium between demand and supply as industry growth moderated,” says the airline’s president, Glen Hauenstein. “For the December quarter, we expect the improved trends to continue and bookings for the holiday period are strong.”
The company anticipates a one-percentage-point impact in revenue from reduced travel demand around the US presidential election, he adds.
“With this, total revenue growth is expected to be up 2% to 4% compared to prior year on capacity growth of 3% to 4%. Industry supply growth continues to rationalise, positioning Delta well in the final quarter of the year and as we move into 2025,” Hauenstein says.
Operating expenses during the third quarter of 2024 rose 6% to $14.3 billion, with the biggest increase coming from salaries, against 6% lower fuel costs.
Delta increased capacity as measured in available seat miles by 4% overall and says international travel trends, led by transatlantic connections, are positive.
“International demand remains strong with trends improving through the quarter in transatlantic and Latin [America], Delta says. “Transatlantic unit revenues inflected positive in the month of September as Paris demand rebounded following the Olympics.”
“Latin America revenue benefited from the continued maturation of Delta’s joint venture with LATAM in South America,” the airline adds. Across the Pacific, “network restoration continues” as it clocked “double-digit revenue growth driven by travel to South Korea and Japan”.
