Higher costs, low base fares send Delta's profit down 29%
Delta Air Lines says its second-quarter profit is down 29% from a year earlier, and it's giving a disappointing outlook for the third quarter
Americans are traveling in record numbers this summer, but Delta Air Lines said Thursday that it saw second-quarter profit drop 29% due to higher costs and discounting of base-level fares across the industry.
The airline is also predicting a lower profit than Wall Street expects for the third quarter.
On a call with analysts and reporters, Delta CEO Ed Bastian sent a clear message to low-cost carriers: Slow your growth to end the oversupply of seats on domestic routes.
Shares tumbled 8% at the opening bell Thursday, and the shares of other carriers were dragged down as well. JetBlue, American, United and Southwest fell between 3% and 7%.
Delta said it earned $1.31 billion from April through June, down from $1.83 billion a year earlier.
Revenue rose 7% to nearly $16.66 billion — a company record for the quarter. That is not surprising to anyone who has been in an airport recently. The Transportation Security Administration screened more than 3 million travelers Sunday, a single-day high.
“Demand has been really strong,” Bastian said in an interview. “International, business (travel), our premium sector all outperformed.”
Delta's results showed a continuing divide between passengers who sit in the front of the plane and those in economy class. Revenue from premium passengers jumped 10% — about $500 million — but sales in the main cabin were flat with a year earlier.
Wealthier Americans are benefiting from strong gains in stock prices and the value of their homes, according to economists, while middle-class families are more likely to be holding back on spending because high
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