Delta Air Lines (DAL) Q2 2024 Earnings

Nurphoto | Nurphoto | Getty Images

Delta Airlines forecast record third-quarter revenue on Thursday, thanks to rising summer travel demand. But the forecast fell short as airlines cut fares after expanding flights.

Shares of Delta fell about 8% in premarket trading. Other U.S. airlines were also lower.

The Atlanta-based airline kicked off a profitable season with full planes on Thursday, but profits are under pressure as costs rise and expanded capacity pressures fares.

The airline expects flight capacity to increase by 5% to 6% in the third quarter compared to last year, slower than the 8% increase in the second quarter.

This is how the company performed in the three months ending June 30compared to Wall Street expectations based on LSEG consensus estimates:

  • Adjusted earnings per share: $2.36 vs $2.36 expected
  • Adjusted turnover: $15.41 billion vs. $15.45 billion expected

For the three months ended June 30, Delta posted adjusted revenue of $15.4 billion, up 5.4% from a year ago and below Wall Street estimates. Net income fell nearly 30% from a year ago to $1.31 billion, or $2.01 per share, with operating expenses rising 10% from a year ago. After adjusting for one-time items, Delta reported profit of $1.53 billion, or $2.36 per share, in line with analysts' estimates.

“The second quarter was a very strong performance,” CEO Ed Bastian said in an interview. “What you're seeing is the impact on the domestic market from the lower rates that were discounted this quarter.”

Bastian said lower U.S. industrial capacity will better match demand toward the end of the summer. Delta said business travel continues to increase and most customers expect to maintain or grow their business travel spending this quarter and beyond.

Revenue from international travel has been strong since the pandemic subsided, though airlines have expanded their schedules, meaning more competition for customers. Unit revenues for transatlantic flights will take a 1 percentage point hit from the Summer Olympics in Paris, Delta said. The impact is equivalent to about $100 million from June through August, Bastian told CNBC. The airline has more capacity to the French capital than rivals through its partnership with Air France.

Delta expects to break more revenue records in the current quarter. The company said it expects revenue to rise as much as 4% and expects adjusted earnings per share to be between $1.70 and $2 per share, less than the $2.05 per share expected by analysts polled by LSEG.

Despite its slightly lower-than-expected outlook, Delta is a standout in the airline industry, the most profitable of the U.S. airlines, several of which have struggled to make a profit. Rival United AirlinesDelta, which reports earnings next Wednesday, is trying to catch up with Delta, and both carriers are busy adding more premium seats. Analysts have more “buy” ratings for Delta and United than for any other U.S. airline.

Delta reported that growth in premium tickets, such as first class, rose 10% in the second quarter to $5.6 billion, while coach revenue rose 0.3% to about $6.7 billion. The lucrative American Express The credit card transaction generated $1.9 billion, up about 9% from last year.

Bastian said Delta is “fairly well protected” from overcapacity in the industry because the company generates much of its revenue from premium seats and other sources rather than standard coach tickets.

Delta reiterated its full-year earnings outlook of $6 to $7 per share and said it still expects to generate free cash flow of as much as $4 billion.

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