Delta Air Lines reported a small first-quarter profit and said on Wednesday that travel demand was strong ahead of the summer vacation season, with travelers seemingly unfazed by recent industry incidents ranging from a panel that blew up a plane during flight, until a tire is dropped by another aircraft during take-off.
Delta reported the highest revenue for any first quarter in its history and a profit of $37 million. He expects record revenues in the current quarter as well. The airline said second-quarter earnings were likely to beat Wall Street expectations.
CEO Ed Bastian said Delta’s best 11 days for ticket sales occurred in the first weeks of 2024.
If passengers are worried about a series of troubled flights and increased scrutiny of planemaker Boeing, “I haven’t seen it,” Bastian said in an interview. “I only look at my numbers. The search is the healthiest I’ve seen.”
A slight majority of Delta’s fleet of more than 950 planes are Boeing models, but in recent years it has bought mostly from Airbus, including a January order for 20 large Airbus A350s. As a result, Delta will avoid the dilemma faced by rivals United Airlines and American Airlines, which cannot receive all the Boeing planes they have ordered. United is even asking pilots to take unpaid leave in May due to a shortage of planes.
“Airbus has been consistent over the last five years (in) meeting its delivery targets,” Bastian said.
Delta does not operate any Boeing 737 Max planes, the plane that was grounded globally after two fatal crashes in 2018 and 2019 and that suffered a panel explosion on an Alaska Airlines flight this year. However, the Atlanta-based airline has ordered a new, larger version of the Max that has yet to be approved by regulators. Bastian said the Deltas will be happy to use Max 10 when they arrive.
Although Delta has largely avoided the headaches caused by Boeing, it faces other hurdles in dealing with crowds this summer.
Delta is lobbying the federal government to again allow it to operate fewer flights to the New York area. Otherwise, Delta could lose valuable takeoff and landing slots.
The Federal Aviation Administration granted a similar request last summer and even extended it until the end of October. The FAA said the relief has helped airlines reduce canceled flights at the region’s three main airports by 40 percent.
Peter Carter, the executive vice president who oversees government affairs, said Delta and other airlines need another waiver to allow fewer flights this summer because the FAA still doesn’t have enough air traffic controllers.
“If the exemption was missing, I think we would have, as an industry, some real challenges in New York,” Carter said.
Airlines for America, a trade group of major US carriers, is also pushing for an exemption from New York’s minimum flight rules. The FAA said it would review the request.
Delta customers will see another change – a new boarding system. Instead of boarding in groups with names like Diamond Medallions, Delta Premium Select and Sky Priority, passengers will board in groups numbered one through eight. The airline says it will be less confusing.
“When you have a number and stand in line, we’re all trained to know when it’s our turn,” Bastian said.
The change will not change the pecking order when each customer type is on board. Those with the cheapest tickets, Basic Economy, will still board last.
Delta’s first-quarter profit follows a $363 million loss a year ago, when results were weighed down by the cost of a new pilot labor contract.
“We expect Delta to be one of the few airlines to report a profit in the March quarter,” TD Cowen analyst Helene Becker said before Delta’s results were released.
Delta said that excluding special items, it earned 45 cents per share. Analysts had expected 36 cents a share, according to a survey by FactSet.
The airline forecast second-quarter earnings of $2.20 to $2.50 per share. The Wall Street consensus was $2.22 per share. The company missed its full-year profit forecast of between $6 and $7 per share.
First-quarter revenue rose 8% to $13.75 billion. Excluding Delta’s Pennsylvania refinery, operating income was slightly ahead of analysts’ estimates. The airline said second-quarter revenue would be 5% to 7% higher than a year ago.
The airline said large corporate customers – who have been slower than tourists to resume flying after the coronavirus pandemic – are spending more on travel, including technology and financial services firms.
Delta boosted profit by focusing more on premium passengers, who pay the highest fares, and cashed in on a credit card partnership with American Express.
However, costs can also increase. Jet fuel is higher than it was a year ago after oil prices rose, and Delta is spending more on plane maintenance this year.
Shares of Delta Air Lines Inc. were down 2.3% by the end of regular trading on Wednesday.
