Categories Analysis, Industrials

Delta Air Lines (DAL): Strong holiday demand anticipated to drive revenue recovery in Q4

Revenue in Q4 is expected to recover to the low 70s percentage relative to 2019

Shares of Delta Air Lines (NYSE: DAL) were down 5% on Wednesday despite the company reporting better-than-expected results for the third quarter of 2021. Both revenue and earnings surpassed analysts’ projections and the airline delivered its first profit since the start of the pandemic but it cautioned that higher fuel prices could weigh on profitability in Q4. The stock has gained 29% over the past 12 months.  

Quarterly performance

Operating revenue, on a reported basis, fell 27% year-over-year to $9.2 billion but beat market expectations. GAAP net income dropped 19% to $1.21 billion, or $1.89 per share, versus the prior-year quarter. Adjusted EPS declined 87% YoY to $0.30 but surpassed estimates.


In Q3, total passenger revenue was 63% recovered compared to the same period in 2019. Domestic passenger revenue recovered to 72% of Q3 2019 levels while international passenger revenue was 42% restored. Cargo revenue increased 39% YoY versus Q3 2019, marking the fourth consecutive quarter of growth. The strength in cargo is expected to continue through Q4.

In Q3, domestic corporate volume was 40% recovered compared to Q3 2019 as corporations put off their office reopenings due to the Covid variant. Although corporate volumes improved sequentially from the second quarter, they still came below expectations. Corporate volumes picked up by the end of September and the improvement is visible in October.

In its conference call, Delta said that over the last week domestic business volume was close to 50% restored. The company expects to see a meaningful improvement in business travel from the beginning of the New Year when offices are expected to reopen.

Delta’s corporate surveys indicate that the majority of respondents expect travel volumes in Q4 to either match or surpass those seen in Q3. Corporate customers appear ready to travel, reopen offices and develop business relationships in person.


Delta is seeing an improvement in demand but the increase in fuel prices is expected to put pressure on profits for the fourth quarter of 2021. Adjusted fuel price per gallon is expected to be $2.25-2.40, reflecting an increase of nearly $0.40 per gallon from Q3. Delta currently expects a modest loss as fuel price increases could take a toll on profits.  

The company expects the strong holiday demand and improvements in corporate and international demand will help Q4 revenue recover to the low 70s percentage relative to 2019. Capacity is expected to be 80% restored relative to Q4 2019.

Click here to read the full transcript of Delta Air Lines’ Q3 2021 earnings conference call

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