Reuters File Photo: On October 28, 2020, a Delta Air Lines Airbus 350-900 plane took off from Sydney Airport in Australia. Reuters / Lauren Elliott
Written by Rajesh Kumar Singh and Sanjana Shivdas
(Reuters) – Delta Airlines Lines Inc. warned of pre-tax losses for the fourth quarter due to sharp rise in fuel prices, after posting its first quarterly profit without federal assistance since the coronavirus epidemic, sending its shares down.
Oil prices have reached a multi-year high in the face of threats to the recovery momentum in the airline industry. Fuel costs accounted for about 20% of Delta’s integrated operating costs in the third quarter. The carrier said a 5 percent increase in fuel prices would increase its costs by about 40 40 million.
In response, CEO Ed Bastian suggested that the airline may have to bear the increased costs to consumers.
“There is nothing we can do to keep fuel prices low,” he said. “All we have to do is have the ability to include it in our price.”
Fuel Historically, the airline industry has been able to increase fares in order to increase fuel costs. But while demand for air travel is still below pre-epidemic levels, such measures carry risks.
Shares of Delta were down 5.2% at .2 41.28 in mid-day trading.
The Atlanta-based carrier says its revenue has returned to two-thirds of its 2019 level due to the continued improvement in travel demand.
Bastian said the company’s revenue is projected to reach 5% of pre-epidemic levels in November and December, thanks to strong holiday demand and improved international and corporate travel. He expects the company’s revenue to return to 2019 levels in 2023.
U.S. Airlines is overwhelmed by the Biden administration’s decision to re-launch the Transatlantic route in November, which accounted for up to 17% of 2019 passenger revenue for the big three carriers.
Delta said bookings for transatlantic flights have more than quadrupled in November and December since the White House announced the decision.
Carrier also reported a pick-up of business travel last month, saying volumes are now at an all-time high since the recovery in air travel began.
“Since the restrictions have been lifted, we are going to see substantial demand,” he said. “There’s high interest and high demand, not just for consumers, but for businesses coming to the United States.”
As a result, Bastian hopes that 2022 will be a good year for recovery when the coronavirus epidemic throws air travel into its worst recession.
The airline has hired more than 8,000 employees since the beginning of 2021 and plans to hire more pilots, flight attendants and mechanics next year to boost demand for air travel.
Delta, the first major US airline to adjust its third-quarter financial results, has adjusted fuel prices from ২ 2.25 to 40 2.40 per gallon in the current quarter, up from $ 1.94 in the September quarter.
City analyst Stephen Trent, however, thinks the pace of demand recovery, especially in the transatlantic corridor, should alleviate Wall Street’s concerns about energy costs.
“Leaving in 2022 seems more relevant to continuing revenue recovery than worrying about oil prices,” he said.
According to Refinitive’s IBES data, consolidated profit for the quarter came in at 30 cents a share, down from analysts’ average 17 cents per share.