Delta's Stock Falls 7% After Outlook Misses Estimates as Carriers Slash Summer Fares

Bloomberg07-11

Delta Air Lines Inc. expects profit this quarter to fall short of Wall Street’s expectations as heavy competition in the domestic market drives ticket prices down.Shares fell 7.8% in premarket trading...

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That compares with the $2.04 average of analysts’ estimates compiled by Bloomberg. Revenue will increase 2% to 4%, below expectations for a 5.3% bump.The forecast highlights the broader impacts as carriers — particularly in the lower end of the market — compete to fill extra seats added during the high-demand summer season. Rivals across the industry are forced to match lower fares to remain competitive.“Excess supply has led to heavy discounting,” Delta Chief Executive Officer Ed Bastian said in an interview. “Like everyone, you get impacted.”Price cuts have been “particularly acute” for June through August, Bastian said, estimating that industry capacity is exceeding demand by 3% to 4%. Carriers have already taken steps to resolve the issue by pulling down capacity starting in September.Delta, the first US carrier to provide a third-quarter preview, said it’s planning to slow growth now that the airline has fully restored its core airport hubs and international network. Capacity expansion this quarter will be no more than 6%.The carrier is grappling with heavy costs, including a $500 million annual increase in labor spending after giving most employees a raise on June 1, and a $350 million increase in maintenance spending. Non-fuel costs to fly a seat one mile, a gauge of efficiency, will increase as much as 2% from 2023.Delta maintained its full-year earnings forecast of $6 to $7 a share and free cash flow of as much as $4 billion.Uneven PerformanceThe US airline industry has faced an uneven year, as fare discounts, persistently high costs and supply-chain woes have offset the benefits of record summer passengers and rebounding corporate travel. Delta had largely sidestepped many of the most prominent challenges plaguing competitors, including activist investors, late jet deliveries and labor unrest.Delta’s volumes for lucrative corporate travel rose about 13% in the second quarter, Bastian said, and revenue from international passengers increased over 2023. Sales of premium products jumped 10% year over year, while main cabin ticket revenue was little changed.Still, adjusted profit in the period was $2.36 a share, falling just short of the average $2.38 expected by analysts. Revenue was $15.41 billion.Delta has restored its normal schedule for retiring older planes, after operating some for longer periods because of delays in receiving new aircraft and supply-chain chokepoints that were holding up new engines and replacement parts. It expects to get 40 to 50 new planes this year from Airbus SE, with deliveries “plus or minus within a couple of months” of schedule.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"movement","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":3,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1190155102"}