Sunday, October 17, 2021

Delta fears rise in gas prices as airline posts $1.2B profit

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Delta Air Lines on Wednesday announced a $ 1.2 billion profit in the third quarter with the help of the latest tranche of federal pandemic aid for airlines, but warned that rising fuel prices could lead to “normal” losses in the fourth quarter.

The airline is also expecting higher labor costs as it hired thousands of employees to replace those who left the company last year when the impact of the pandemic on travel was at its worst.

Delta shares rose more than 4% in morning trading.

The airline notes that when COVID-19 infections jump in the U.S. in the summer, the demand for travel improves after reaching a flat area, leading to an increase in the so-called delta option.

“We’re seeing a lot of orders go up in the last four or five weeks,” CEO Ed Bastian said. “As the option goes down, people start going back.”

Business and international travel continue to be delayed — corporate travel accounted for 40 percent of the pre-pandemic level. Airlines are hoping the workers will return to their offices and the U.S. will step up as it eases border restrictions in November.

Delta, led by CEO Ed Bastian, says it is slowly rebuilding its flight schedule.

Delta is recovering much of its previous schedule. The airline handled 71 percent of passenger traffic in the third quarter and expects that figure to rise to 80 percent in the fourth quarter. This will help boost revenue slightly, with the airline forecasting it will account for more than 70% of the space by the end of 2019.

In most cases, Delta avoided a large number of canceled and delayed flights affecting competitors, for example, in the morning, Southwest Airlines canceled about 2,400 flights from Saturday to Monday. According to FlightAware, Delta canceled more than 20 in those three days. In a subtle critique of the Southwest, Bastian said Delta had been conservative until it had enough staff to carry out the flights.

“Some carriers tried to be opportunistic to gain market share during the pandemic, and some carriers were a bit disciplined,” he said in an interview. “I think you saw the effect.”

A refueling machine is being prepared on the asphalt
Delta has made a profit, but warns that rising fuel prices will have a negative impact on the next quarter.

Delta is also setting its own direction on vaccination policy. The company is encouraging employees to be vaccinated against COVID-19 and will introduce a $ 200 health insurance surcharge for unvaccinated employees next month.

But unlike its rivals – and if the White House is in trouble – Delta continues to conduct regular tests as an alternative to strikes. Major U.S. carriers have government contracts to operate flights on airlines, and a recent order by President Joe Biden requires federal contractors to vaccinate their employees by Dec. 8; testing is not an option for contractors and their employees.

Bastian said he had discussed the matter with administration officials, but he declined to give details of the talks. He said that if Delta could provide a high percentage of workers vaccinated, it should be good enough. He said 90 percent of Delta employees have already been vaccinated and that will be 95 percent by November.

air passengers queuing at the airport terminal
Business travel continues to lag behind, hurting the airline industry, and corporate travel is down 40 percent from pre-pandemic levels.

“Mandates are a way to vaccinate people,” he said. “What we’re showing is alternative methods of vaccinating people, and we’re still meeting the essence of the requirements. We’ll evaluate if necessary, but I’m sure we’ll vaccinate effectively.”

Delta’s third-quarter revenue was $ 1.21 billion, down 19% from the same quarter in 2019. Atlanta received a $ 1.82 billion federal grant from a special program approved by Congress and the Trump and Biden administrations to cover most of the airlines. labor costs.

Without that help and other special items, Delta said it would earn $ 216 million, or 30 cents per share. This surpassed the 15-cent forecast for 17 shares of 17 analysts polled by FactSet.

a woman wearing a mask receives the vaccine from a medical professional
According to Delta’s CEO, 90 percent of the airline’s employees will now be vaccinated and 95 percent will be vaccinated by November 2021.

Revenue and investment from the Delta refinery was $ 9.15 billion, down 27 percent from the same period in 2019. Passenger revenue was 37 percent.

Delta expects jet fuel prices to rise throughout the year and other costs to increase from 6 percent to 8 percent compared to the same quarter of 2019. This is mainly the cost of hiring new workers. Federally-funded airlines have been banned from firing workers since the pandemic, but they offered benefits last year that convinced tens of thousands of people to quit.

Delta has hired about 8,000 people by 2021 and expects to add another 1,000-2,000 by the end of the year, Bastian said.

“A year ago, we had about 20,000 people retired, so we’re starting to recover,” he said.

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