Latest News

Delta anticipates a profit boost through cost and capacity control

Delta Air Lines forecasted a higher-than-expected profit in the current quarter as well as for the full year, citing the industry's effort to align capacity to demand.

In premarket trading, shares of the airline were up by nearly 8%.

The Atlanta-based airline, like most U.S. carriers, pulled its financial forecast for 2025 in April, as the trade war between President Donald Trump and China weakened consumer and business confidence. Bookings were affected.

Industry executives claim that travel demand has stabilised since then. Government data show that passenger traffic in the U.S. is still lower than a year earlier, resulting in a decrease in airfares.

Delta's earnings report for the second quarter confirmed this view. Bookings are flat compared to last year, according to the company. However, its pricing power is still under pressure in the U.S. market.

Carriers will reduce capacity in July to ensure that the supply of airline tickets matches demand and prevent further discounting.

Delta expects the capacity rationalization to increase unit revenue in the second half of this year, which is a proxy for price power.

To protect its margins, the company also relies on cost-controlling measures. The company expects that non-fuel operating expenses will be flat to down in the third-quarter compared to a year earlier.

Ed Bastian, the CEO of the airline, said that the company was focused on "managing levers in our control to deliver strong cash flow and earnings."

Delta expects a profit adjusted of between $1.25 and $1.75 per share for the third quarter ending in September. According to data compiled and analyzed by LSEG, the midpoint of forecast is $1.50 a share, compared to analysts' average estimates of $1.31.

The company anticipates earnings adjusted for the entire year in the $5.25 to $6.25 per share range. Analysts had predicted a profit per share of $5.39.

Delta Airlines and United Airlines have performed better than other U.S. airlines despite a decline in travel demand.

Delta, for example, saw its premium ticket revenue increase by 5% on an annual basis in the second quarter despite a decline in revenue from main cabin tickets. Its loyalty revenue increased by 8% on an annual basis.

A boom in aircraft maintenance and repair led to a 29% increase in revenue for its Maintenance, Repair, and Overhaul division compared to the same quarter a year earlier.

According to LSEG, it reported an adjusted profit per share of $2.10 in the three months ending June. This compares with the analysts' average estimate, which was $2.06, according to LSEG. (Reporting and editing by Matthew Lewis in Chicago)

(source: Reuters)