Delta Air Lines raises profit outlook as rivals warn of weakening demand

Delta Air Lines Inc. boosted its fourth-quarter earnings outlook but trimmed the top end of a revenue forecast, keeping a bullish travel forecast even as smaller carriers see weakening demand.

The largest U.S. airline by market capitalization updated its fourth-quarter projection and full-year outlooks for 2022 through 2024 in a statement Wednesday, ahead of presentations by executives at an investor day event in New York.

Both Delta and United Airlines Holdings Inc. expect continued expansion despite the risk of recession next year. Atlanta-based Delta’s chief executive officer, Ed Bastian, has said a souring economy is unlikely to dent pent-up demand for travel. United CEO Scott Kirby said his company projects a “mild recession” in the US next year, but he reiterated Tuesday that he isn’t seeing a weakening of travel demand.

But smaller airlines aren’t so sure. JetBlue Airways Corp. raised questions about the strength of demand on Tuesday, prompting a 7.7% slide in its stock. Similarly, Alaska Air Group Inc. narrowed its revenue forecast for the fourth quarter, noting “a modest softening in corporate travel bookings” and Spirit Airlines Inc. slightly reduced its capacity forecast for the quarter due to the impact of Hurricane Nicole.

Delta’s shares rose 3.6% at 9:34 a.m. in New York. The stock was down 15% this year as of the close on Tuesday, the second worst performer in a Standard & Poor’s index of the five biggest US carriers.

Narrower revenue range

Delta sees fourth-quarter adjusted earnings of $1.35 to $1.40 a share, up from an earlier peak of as much as $1.25 and topping the $1.15 expected by analysts. Revenue will increase 7% to 8% this quarter, compared with a range of 5% to 9% earlier. Full-year earnings will be as much as $3.12 a share, compared with $2.89 in analysts’ estimates, while revenue excluding the airline’s refinery will be as much as $45.6 billion.

“Demand for air travel remains robust,” Bastian said in the statement.

The carrier expects 2023 earnings of as much as $6 a share and sales growth of up to 20% over this year, with a 10% to 12% operating margin. Non-fuel costs to fly each seat a mile, a gauge of efficiency, will drop as much as 7% next year from 2022, but will remain 10% to 12% higher than pre-pandemic levels in 2019.

Delta also said it remains on target to hit 2024 goals, unveiled last year, of earnings per share of more than $7 and at least $4 billion in free cash flow. The airline reiterated its plan to have flying capacity, cut during the pandemic, fully restored during 2023.