Delta Air Lines (DAL) 2Q23 results

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Delta Air Lines posted its highest-ever quarterly revenue and earnings thanks to searing travel demand that has defied fears of an economic slowdown for months.

International travel and demand for premium seats like first class were unprecedented in the second quarter, while a 22% drop in Delta’s fuel costs boosted the company’s bottom line.

The Atlanta-based airline on Thursday raised its 2023 earnings forecast to an adjusted $6 to $7 per share, up from its estimate last month of the high end of $5 to $6 per share. Delta’s stock rose more than 4% in premarket trading after the results.

Chief executive Ed Bastian said he expects consumers’ desire to travel will fuel bookings for years, calling the current period “the middle of the travel boom”.

“I think the trends we’ve seen this year are going to continue,” he said in an interview.

Bastian said international demand remains robust through the fall and he expects a slow but steady increase in corporate travel bookings.

Delta is the first of the US airlines to publish results for the second quarter, and the report sets an optimistic tone for the rest of the year. United Airlines and American Airlines are scheduled to report next week.

In the third quarter, Delta expects to earn $2.20 to $2.50 per share, above analysts’ expectations, on a 16% increase in capacity. The airline predicted a jump in revenue of as much as 14% from the previous year.

Here’s how Delta performed in the quarter ended June 30 compared to Wall Street expectations based on Refinitiv consensus estimates:

• Adjusted earnings per share: $2.68 cents vs. $2.40 expected.
• Adjusted income: 14.61 billion dollars against the expected 14.49 billion dollars.

Transatlantic travel was particularly strong in the spring and early summer, with revenue from these trips up more than 60% from a year ago, compared with an 8% increase in domestic revenue and a 21% increase in passenger revenue overall. Delta and its rivals have increased capacity to Europe this year in anticipation of the resurgence. (Bastian told CNBC he recently traveled to the south of France.)

Growth in premium ticket revenue also outpaced growth in main cabin economy.

Unit revenue, a measure of how much airlines generate for each seat they fly one mile, rose 1% year over year, and 17% increase in capacity.

“If you were to ask any quarter where we increased capacity by high double digits and we held our overall prices, that would be pretty amazing,” Bastian said.

Delta’s net income for the quarter was $1.83 billion, or $2.84 per share, up from $735 million, or $1.15 per share, a year ago. Adjusted for certain items, earnings per share were $2.68, up from $1.44 in the same period last year.

The airline’s net income was the highest since the fourth quarter of 2013, when the airline put more than $8 billion in tax credits back on its balance sheet.

Delta brought in $14.61 billion in revenue, adjusted to strip out refinery sales, in the three months ended June 30, up 19% from a year ago and above analysts’ estimates. Total revenue of $15.58 billion was up 13% from the prior year.