Delta Air Lines isn’t expecting Q4 to be a profitable quarter: this is why

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Oct 13, 2021
  • Delta Air Lines reports its first profitable quarter since the start of the pandemic.
  • Chief Executive Ed Bastian is not expecting Q4 to be a profitable quarter.
  • Shares of the U.S. air carrier are down nearly 5.0% on Wednesday morning.

Delta Air Lines (NYSE: DAL) reported its first profitable quarter since the start of the pandemic on Wednesday. The air carrier said its profit and revenue in the fiscal third-quarter beat Wall Street expectations by a significant margin.

Why are shares trading lower?

Shares of Delta Air Lines, however, fell about 5.0% this morning as the airline said it wasn’t expecting Q4 to be a profitable quarter due to higher fuel costs. On CNBC’s “Squawk Box”, CEO Ed Bastian said:

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For us, fuel is our biggest commodity cost, biggest individual cost outside of labour. It’s up 60% this year and almost 20% just in the last month or so. It’s a headwind, and it’ll determine if we’re profitable or not. But the demand is recovering quickly as we see in the advanced bookings.

But Bastian did applaud the team for a phenomenal job of making Delta Air Lines the only major airline to return to profitability in Q3 without government aid or any other support.

Q3 financial performance

Delta Air Lines reported $1.21 billion in net income that translates to $1.89 per share. In the comparable quarter of 2019 (before the pandemic), its net income stood at a higher $1.50 billion or $2.31 per share.

Adjusted for one-time items, the air carrier earned 30 cents per share. Delta generated $9.15 billion in revenue, down 27% from the 2019 equivalent.

According to FactSet, experts had forecast the airline to post 15 cents of adjusted EPS on $8.38 billion in revenue.  

Other notable figures

Other notable figures in the earnings report include a decline in load factor from 88% to 80% in Q3 versus 78% expected, as per the earnings press release.

Capacity in the recent quarter stood at 71% compared to 2019 levels, with Delta expecting Q4 capacity to be at 80% of the pre-pandemic equivalent.

According to CEO Bastian, both business and international travel is starting to pick up. Delta recently saw its best week in terms of bookings since the start of the pandemic.

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