Delta Air Lines (DAL) Q2 2024 Earnings

Delta shares fell about 9% in premarket trading. Shares of other U.S. airlines also fell.

The Atlanta-based airline on Thursday kicked off an airline earnings season marked by packed planes but profits under pressure as costs rise and affordability increases. The Transportation Security Administration said it screened more than 3 million people for the first time Sunday at U.S. airports.

Delta stands out in the airline industry as the most profitable carrier, and Thursday's report is a sign that rivals, especially those focused on the U.S. air travel market, could struggle this summer.

Rival United Airlines, which reports results Wednesday, is trying to catch up with Delta’s profitability, and both airlines are racing to add more premium seats that bring in more revenue from consumers. Analysts give Delta and United the highest “buy” ratings of any U.S. carrier.

This is how Delta performed in Three months ended June 30compared to Wall Street expectations based on LSEG consensus estimates:

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

Delta posted adjusted revenue of $15.4 billion for the three months ended June 30, up 5.4% from a year ago and below Wall Street estimates. Net income fell about 30% from a year ago to $1.31 billion, or $2.01 a share, as operating expenses rose 10% from a year ago. Adjusted for one-time items, Delta reported earnings of $1.53 billion, or $2.36 a share, in line with analysts’ estimates.

“The second quarter performance was really strong,” CEO Ed Bastian said in an interview. “What you’re seeing is the impact of the lower discounts on prices in the local market during the quarter.”

Bastian said the U.S. industry’s reduced capacity by the end of the summer will better match demand. Delta said corporate travel continues to grow and most customers expect to maintain or increase their corporate travel spending this quarter and beyond.

The airline expects its capacity to grow by 5% to 6% in the third quarter compared to last year, a slower pace than the 8% it expanded in the second quarter.

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

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

Delta is “fairly well insulated” from industry overcapacity because it derives much of its revenue from premium seats and other sources rather than standard economy tickets, Bastian said.

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