Delta’s earnings disappoint, raising questions about how other airlines will perform

It seems Delta Air Lines is not immune to one problem. has affected most of the US air travel industry. in the past year: high costs and fierce competition.

The Atlanta-based airline made more than $1.3 billion from April to June, the company said Thursday. To be clear, that might be the best any airline has ever done—though we’ll have to see how United Airlines does next week.

But Delta’s earnings fell below Wall Street expectations and the company’s own operating performance in the second quarter of last year.

Want more aviation news? Sign up for TPG’s free bi-weekly Aviation newsletter.

It’s the latest example of disappointing financial results for a major US airline despite soaring demand for air travel in recent months.

July 7 was the busiest day ever at U.S. airports, with the Transportation Security Administration reporting more than 3 million passengers were screened for the first time in history. Nine of the 10 busiest days ever at TSA checkpoints have occurred since Memorial Day weekend.

But that doesn’t mean airlines will enjoy record success.

Fierce competition also catches up with Delta

Carriers are facing higher fuel, staff and maintenance costs — not to mention the impact of fierce competition due to a market flooded with capacity.

Airlines added a total of 5.6% more seats on domestic routes between April and June compared to the second quarter of last year, according to data from aviation analytics firm Cirium.

Daily News

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers to get the latest news, in-depth guides, and exclusive offers from TPG experts

The number of domestic seats increased by 6.5% compared to 2019.

As TPG reported in June, all those flights — and seats — have pushed ticket prices down, thanks to the laws of supply and demand. That’s has created a variety of flight deals available that travelers haven’t seen in years. This is good news for customers but not so good news for airlines struggling to make a profit.

Other airlines have reported struggling to fill all those seats and make money for months. Low-cost carriers spent much of 2024 network disturbanceoften have to pull planes away from highly competitive cities like Orlando.

Southwest Airlines cut its financial forecast last month. So did American Airlines — and its CEO recently lamented the damage that recent “discounting” has done to the airline. The loss of pricing power, combined with the fallout from a The company’s sales strategy backfired.could add to tensions during the earnings call later this month.

But so far, we haven’t heard any concerns from Delta, which has led all US airlines in profits since the coronavirus pandemic hit.

“Seat growth in the domestic industry has accelerated in the summer months, impacting main cabin capacity performance,” Delta CEO Ed Bastian acknowledged on a conference call with analysts Thursday.

It begs the question: What if Delta Now that the airline has run into trouble, what does that mean for its competitors — the airlines it has consistently outperformed in recent years?

“We think Delta has better immunity,” TD Cowen analyst Helane Becker wrote Thursday, adding that Delta’s results “will likely raise concerns about the health of the industry” as a whole.

Many rays of hope

It’s certainly not all bad news for Delta.

The company said it made more money on Sunday than any other day in its history – a sign it was reaping the benefits of the busiest day ever at US airports.

Demand for travel has not decreased.

Delta also sees no signs that overall travel demand will decline.

“Our core customer base is very healthy, and demand for premium products continues to extend beyond the main cabin,” Bastian said. The latter trend would likely give Delta, which has a heavy focus on premium seats, an advantage over its competitors.

The $1.9 billion the company raised in Q2 through a partnership with American Express didn’t hurt either. That was boosted by 30% Delta SkyMiles Members, the executive said, are now carrying a Delta-Amex Credit Card (The percentages are consistent with figures the company shared last year).

Business travel helps Delta advance

Delta also believes the fall months will yield better results.

Early numbers show corporate travel previously seen spike This year could be a big boost after the slow return of business travel that has plagued airlines in 2021-2023.

Corporate and business travel is typically more profitable for airlines than leisure travel, as customers tend to be less price-sensitive than self-paying travelers.

Europe is still a blessing — with one big exception

But another post-pandemic trend TPG reported earlier this year are still alive and well, Delta executives noted Thursday. That means travelers are flying across the Atlantic in numbers far beyond the hottest summer months.

“Whether it’s people who are retired, people who are double income and don’t have kids, people who don’t have to worry about education or not,” said Delta president Glen Hauenstein, “we really see European demand across the board remaining strong through September, October and even into November.”

That’s certainly good news for Delta, which could lose $100 million this summer from the 2024 Paris Olympics, executives say; travelers who don’t attend the Games often look to avoid the host city.

Industrial capacity is loosened

Delta will also benefit from a leaner national flight schedule later this year, as many airlines slow (or in some cases reverse) the rapid growth in domestic flights in recent years.

“Domestic capacity is clearly shrinking,” Jamie Baker, an analyst at JP Morgan Chase, wrote Thursday, offering a still-dire forecast for struggling airlines. “The bad news,” Baker added, “is that we have yet to identify a path back to sustainable profitability for the currently struggling airlines.”

Optimistically it won’t lose ground.

Still, Delta believes it will maintain its edge, even as others — like low-cost carriers — appear to be trying to compete with larger airlines by middle seat block And no change fee.

“Premium is not just about seating arrangements. It’s about the overall experience,” Bastian said, noting the airline’s recent launch Delta One Lounge at New York’s John F. Kennedy International Airport (JFK) — and the top spot Delta recently won in TPG Best Airlines Report 2024.

“The cost of service has gone up for everyone, but especially for low-cost carriers,” Bastian said of budget airlines. “And the only way you can cover that cost is to provide a better experience.”

Delta expects to capture about half of the U.S. airline industry’s profits in the first half of 2024. Other airlines will report their second-quarter financial results this month, starting with United — Delta’s top competitor this year — next week.

Read more related: