Delta Air Lines Reports 29% Decrease in Profit Due to Rising Costs and Low Base Fares
- Delta Air Lines' second-quarter profit decreased by 29% compared to the previous year.
- The airline attributes the decline to higher costs and low base fares despite strong demand.
- Delta provided a disappointing outlook for the upcoming third quarter.
In a bustling summer travel season, Delta Air Lines reported a 29% drop in second-quarter profit due to increased costs and industry-wide fare discounts. Despite a 7% revenue increase to nearly $16.66 billion, Delta's earnings fell to $1.31 billion from $1.83 billion a year earlier. The airline's stock plummeted 8% at the opening bell, impacting other carriers as well. The surge in travel demand was evident as the Transportation Security Administration screened over 3 million travelers in a single day, setting a new record. Delta's financial results highlighted a disparity between affluent passengers and those in economy class, with wealthier Americans benefiting from stock market gains and property value increases. The airline, along with United and others, has intensified efforts to attract premium customers with enhanced services. However, the industry's rapid expansion of flights has outpaced demand growth, leading to lower fares. Delta's expenses surged by 10%, driven by rising costs in labor, fuel, maintenance, and other operational aspects. Despite a strong summer travel demand, Delta's adjusted profit forecast for the third quarter fell below analysts' expectations, projecting earnings between $1.70 and $2 per share. The airline's capacity growth is expected to slow down to 5-6% in the upcoming quarter. Delta's focus on premium customers has positioned it as one of the most profitable U.S. carriers post-pandemic, prompting competitors to enhance their premium offerings. The airline reiterated its full-year earnings forecast and free cash flow expectations. As Delta anticipates record revenue in the third quarter, the airline faces challenges from fare discounts and increased competition in the oversupplied U.S. air travel market. With rivals like United Airlines striving to match Delta's profitability, the industry dynamics are evolving, with a shift towards premium services to drive revenue growth. Despite the hurdles, Delta remains optimistic about its financial outlook and operational performance amidst the changing landscape of the airline industry.