Despite $363 million loss, Delta sees strong travel demand.

Delta Air Lines reported a $363 million loss for the first quarter of 2023. The loss can be attributed to increased spending on labor and fuel, which overshadowed a sharp rise in revenue.

Delta Expects to Make Bigger Q2 Profit than Predicted

Despite the Q1 loss, Delta has predicted a bigger-than-expected profit in the current second quarter, which includes the start of the key summer travel season. Airlines are being aided by the combination of strong demand and limited flights, which has pushed fares higher.

Growth in Airline Bookings Slows Down

However, industry analysts have warned that growth in airline bookings has slowed down compared to this time last year. Delta’s CEO, Ed Bastian, argued that it is unfair to compare current ticket sales with those from a year ago when travel was just starting to boom as pandemic-related restrictions were lifted.

Americans Still Want to Travel Despite Economic Uncertainties

Bastian and other airline executives have been saying for months that travel demand shows no signs of weakening, despite high inflation, layoffs in the tech industry, the failures of a couple of banks, and uncertainty about the economy. They say Americans still want to catch up on travel that they postponed when the pandemic hit.

Delta Expects Strong Q2, With Passenger-Carrying Capacity Up by Mid-Double Digits

“The second quarter is looking very good. The demand picture is strong,” Bastian stated in an interview. “We are looking to grow our (passenger-carrying) capacity by mid-double digits and revenue along a similar pattern” – by 15% to 17% over the same quarter last year.

Booking Trends

Alarming headlines about bank failures and other economic tremors do not appear to be having an impact on bookings, according to Bastian. He said many customers are booking flights farther ahead of time, but cancellations remain elevated since Delta and other carriers relaxed cancellation policies during the pandemic.

Corporate Travel Returned to 85% of Pre-Pandemic Levels

Delta reported that corporate travel has returned only to 85% of pre-pandemic levels. Bastian stated that some of it will never return but is being replaced, as people who are not working in the office are taking more trips that mix work with leisure.

Delta’s Q1 Revenue Jumps 36%

Delta’s first-quarter revenue increased by 36% from a year earlier, to $12.76 billion, with money from passengers in both economy and premium cabins, and income from its refinery near Philadelphia. Delta is the first big U.S. airline to report first-quarter numbers.

Delta Needs Revenue to Rise to Remain Profitable

Delta will have to see an increase in revenue if it is to be profitable because costs are increasing. In the first quarter, traditionally the slowest period of the year for travel, Delta spent 28% more on fuel than it did a year earlier, an increase of $584 million.

Predicting $2 – $2.25 Per Share for Q2 Earnings

Delta predicts that it will earn between $2 and $2.25 per share in the April-through-June quarter. This forecast exceeds analysts’ expectations of $1.66 per share, which is a welcome development for international carriers.

Outlook Looks Positive for Summer Travel Season

Delta’s optimism for the summer travel season is based on approximately the same number of passengers as in pre-pandemic 2019, but not as many flights. Flight cancellations and delays surged last summer. Airlines that were caught short on staff last year have hired thousands of pilots and other employees; they are counting on the federal government having enough air traffic controllers.

Delta and Airline Stocks

Despite Delta’s optimistic outlook for Q2, the airline’s shares were down more than 1% in morning trading. Airline stocks fell the previous day, led by a 9% decline for American Airlines, which gave an earnings outlook that disappointed investors.