Delta Air Lines (DAL) Q2 2024 Results

The Atlanta-based airline kicked off an earnings season Thursday marked by full planes but pressure on profits as costs rise and increased capacity weigh on fares.

The carrier plans to increase its flight capacity by 5 to 6 percent in the third quarter compared to last year, a slower pace than the 8 percent increase in the second quarter.

Here’s how the company performed for the three months ended June 30, compared to Wall Street expectations based on LSEG’s consensus estimates:

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

In the three months ended June 30, Delta reported 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 a share, with operating expenses up 10% from a year ago. Adjusting for one-time items, Delta reported profit of $1.53 billion, or $2.36 a 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 of the tariff reduction that took place this quarter.”

Bastian said the industry’s reduced capacity in the U.S. toward the end of the summer will help it better meet demand. Delta said business travel continues to increase and most customers plan to maintain or increase their business travel spending this quarter and beyond.

International travel revenue has been strong since the pandemic ended, even as airlines have expanded schedules, meaning increased competition for customers. Unit revenue from transatlantic flights will take a 1 percentage point hit due to the Paris Summer Olympics, Delta said. The impact is equal to about $100 million from June to August, Bastian told CNBC. The airline has more capacity to the French capital than its competitors thanks to its partnership with Air France.

Delta expects to set new revenue records in the current quarter. It forecast sales to rise as much as 4 percent and adjusted earnings per share of $1.70 to $2 per share, below the $2.05 per share expected by analysts surveyed by LSEG.

Despite its slightly weaker-than-expected outlook, Delta stands out in the airline industry. It is the most profitable airline in the U.S., many of which have struggled to turn a profit. Rival United Airlines, which reports earnings next Wednesday, is trying to catch up to Delta, and both have been rushing to add more premium seats. Analysts have given Delta and United the highest buy ratings of any U.S. airline.

Delta reported 10% growth in premium tickets, such as first class, in the second quarter to $5.6 billion, while economy-class ticket revenue rose 0.3% to about $6.7 billion. Its lucrative contract with the American Express credit card brought in $1.9 billion, up about 9% from a year ago.

Bastian said Delta is “pretty well insulated” from industry overcapacity because it derives much of its revenue from premium seats and other sources rather than standard coach fares.

Delta reiterated its full-year profit forecast of $6 to $7 per share and said it still expects to generate free cash flow of up to $4 billion.