Delta Airlines Posts Q2 Profit, Further Recovering from the Pandemic Shock

Return to Profits

Delta Airlines (DAL.us) had posted strong financial results for the first quarter of the year, as the world returns to normalcy after the Covid-19 lockdown that devastated the travel industry. Today it released its latest earnings report, for the quarter ended in June, which revealed further progress. ^[1]

Adjusted Operating Revenue was essentially restored to pre-pandemic levels, since it jumped to $12.311 billion, missing the Q2 2019 figures by just 1%, while passenger capacity was 82% restored.

Its bottom line also got a boost and returned to profits, with Adjusted Net Income of $921 million, while Adjusted Operating Margin hit double digits, as it came in at 11.7%.

Domestic business was the main revenue generator that led the recovery, having surpassed the Q2 2019 figures by 3%, while the Cargo segment that supported most airlines during the pandemic had its best ever June quarter.

Better Days & Challenges Ahead

The company sees further recovery ahead, with Delta CEO Ed Bastian talking of "meaningful full year profitability", expecting Adjusted Operating Margin of 11% to 13% for the third quarter. Furthermore, Total Revenue is expected to surpass that of Q3 2019 by 1%-5% and capacity is seen at 83%-85%.

Last month, the International Air Transport Association (IATA) said that most markets should see traffic "reach or exceed" pre-pandemic levels. It also expects the industry's losses to narrow to $9.7 billion this year (from $42 billion in 2021), while a return to profitability is seen in 2023. ^[2]

However, challenges still lay ahead, emanating mostly from the high energy prices in the aftermath of the war in Ukraine, as well as the chaos and the flight cancelations that are being witnessed recently in airports around the world.

Delta Airlines reported average fuel price of $3.82/gallon for the second quarter, a marked rise from Q1, but sees prices easing to $3.45 - $3.60 per gallon in the third quarter. However, the market is extremely tight and as the war in Ukraine carries on, the energy price can be a constant source of uncertainty.

Furthermore, airliners, airports and other companies in the industry struggle to handle increased traffic, which leads to disruptions and flight cancelations. The Atlanta-based company noted that it made "good progress" in restoring operational reliability this month, with an average month-to-date completion factor of 99.2 percent and 84 percent of flights arriving within 14 minutes of scheduled arrival time.

On top of that, surging inflation and monetary tightening by the Fed and other central banks have sparked fears of stagflation and have harmed consumer confidence.

Delta Stock

DAL.us erased more than 25% during the second quarter, dropping to nearly two-year lows, although the current quarter is off to a better start. The stock was down in today's premarket, as the latest US CPI Inflation figures showed another jump.