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Delta returns to profitability but soaring fuel prices could lead to further losses

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The company earned $ 194 million in the quarter, adjusted for special items. This is down from the $ 1.5 billion earned in the quarter of 2019, the year before the pandemic uprooted global air travel.

But the last quarter has been much better than the losses it and other airlines have reported since the start of 2020. Delta (OF) operating losses during the pandemic totaled $ 9.8 billion at the start of this quarter.

“Our September quarter marked a significant milestone in our recovery,” said CEO Ed Bastian, warning that the benefits may be short-lived.

“As demand continues to improve, the recent increase in fuel prices will put pressure on our ability to remain profitable for the December quarter,” he said.

Fuel is the second most important cost for an airline behind the cost of labor. Delta paid an average of $ 1.94 a gallon for fuel in the third quarter, up 55% from a year ago, but about the same price it paid two years ago. But the company has warned that it expects to pay between $ 2.25 and $ 2.40 a gallon on average for the current quarter.

The company reported net profit in the second quarter, but that was mainly due to a final injection of support from the government and other airlines received during the quarter.

Summer trip

Delta and other U.S. airlines had a strong summer travel season as pent-up demand for vacation travel filled the planes. Delta occupied 80% of its available seats in the quarter, slightly below the 88% level it reported in the same period of 2019.

But a major factor in crowded airplane seats is that Delta is still far below the number of flights it made two years ago. The airline’s overall capacity fell 28% in the quarter compared to the same period in 2019, with much of the reduction on international routes. Domestic capacity was down 16%.

Yet Delta’s 2021 schedule is comparatively much closer to its pre-pandemic schedule than it was throughout 2020, when capacity was only half of what it was before the crisis.

Limited capacity and strong demand for leisure travel added to a rebound in air fares. The average amount paid by passengers to travel each mile during the quarter was only 2% below 2019 levels.
This was an impressive result considering that two of the most lucrative forms of travel – business travel and international travel – were still only a fraction of what they were before the pandemic. With overall fares so close to pre-pandemic levels, the average plane ticket for leisure travel is higher than it was before the pandemic.
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The airline’s overall revenue in the quarter fell 27% from 2019 levels to $ 9.2 billion. The airline has flown less than half of its pre-pandemic schedule on transatlantic and transpacific routes, although international flights to and from Latin America are at less than 7% of levels. before the pandemic.

Delta (OF) is the first major airline to publish quarterly results. Its shares edged down in pre-market following the warning about the fourth quarter results.

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2/ https://www.cnn.com/2021/10/13/investing/delta-earnings/index.html

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