CHICAGO, Dec 14 (Reuters) – Delta Air Lines Inc ( DAL.N ) said on Wednesday its profit is expected to almost double next year, driven by “robust” demand for travel and a drop in non-fuel operating costs .
The Atlanta-based carrier forecast adjusted earnings of $5 to $6 per share for 2023, down from about $3.07 to $3.12 per share this year.
That’s well ahead of analysts’ estimates for earnings of $4.80 a share in 2023 and $2.89 in 2022, according to a survey by Refinitiv.
“Demand for air travel remains strong as we exit the year,” Chief Executive Ed Bastian said in a statement.
In an investor update, the company also upgraded its profit estimates for the current quarter. It now expects to post adjusted fourth-quarter earnings of $1.35 to $1.40 per share, down from its forecast of $1.00 to $1.25 per share issued in October.
Delta narrowed its fourth-quarter revenue forecast and now sees it coming in 7%-8% higher than the same period in 2019. In October, the company estimated that fourth-quarter revenue would be 5% to 9% higher compared to 2019.
US carriers have used 2019, before the pandemic, as a benchmark for their performance.
Delta’s update comes at a time when a deteriorating economic outlook coupled with high inflation had caused concerns about consumer demand.
The NYSE Arca Airline Index (.XAL) is down about 30% this year, compared with a 16% drop in the broader S&P 500 (.SPX).
Rising consumer demand has so far helped carriers mitigate higher fuel and labor costs through higher ticket prices. With Delta and other airlines offering big pay raises for pilots, the industry’s labor bill will increase.
Airline executives are looking to pass the increased costs on to customers.
However, a record low personal savings rate in the US as well as rising job losses have cast a shadow over the outlook for travel demand. Any slowdown in consumer spending is expected to hurt airlines’ pricing power.
Carriers have downplayed these concerns. In its investor update, Delta said it expects 15% to 20% year-over-year revenue growth and to generate more than $2 billion in free cash flow next year, enabling further debt reduction.
Non-fuel costs are expected to decrease by up to 7% in 2023 as the company expects to fully restore its network to pre-pandemic levels, resulting in better utilization of its resources.
Meanwhile, a slowdown in the global economy has led to a drop in oil prices, providing some much-needed relief for airlines. Jet fuel prices, which have been one of the two biggest operating expenses for carriers, have fallen more than 20% in the past month.
Delta also reiterated its goal of generating adjusted earnings above $7 per share and return on investment grade metrics in 2024.
Reporting by Rajesh Kumar Singh Editing by Bill Berkrot
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