Delta Air Lines (DAL): What to look for when the airline reports earnings this week

Shares of Delta Air Lines Inc. (NYSE: DAL) were down on Tuesday. The stock has dropped 25% year-to-date and 32% over the past 12 months. The airline is scheduled to report its third quarter 2022 earnings results on Thursday, October 13. Here’s what to look for in the earnings report:

Revenue

Delta has projected total revenue for the third quarter of 2022 to be up 1-5% from the same period in 2019. Analysts are estimating the airline’s revenues to be $12.8 billion, which would reflect a growth of 40% from the $9.15 billion reported in the third quarter of 2021 and 2% from the $12.5 billion reported in Q3 2019.

For the second quarter of 2022, Delta reported operating revenue of $13.8 billion, which was up 10% compared to Q2 2019. In Q2, the company’s domestic passenger revenue was 3% higher and international passenger revenue was 81% recovered compared to the same quarter in 2019.

Last month, at an analyst conference, Delta said it was seeing strong demand for leisure travel and that it expected this momentum to continue during the holiday season. It also sees potential for growth in business travel despite the changes caused by the pandemic. In the current environment, however, there are concerns over the impact of inflation on the airline industry as travel is a discretionary expense.

Profitability

Analysts are projecting earnings of $1.55 per share for Delta in Q3 2022. Delta reported adjusted EPS of $0.30 in Q3 2021 and $2.33 in Q3 2019. In the second quarter of 2022, adjusted EPS was $1.44, down 39% from Q2 2019.

Operating margin in Q2 2022 dropped to 11% from 17% in Q2 2019, hurt by operational challenges and higher fuel prices. The impacts from operational headwinds and higher fuel costs are likely to put pressure on the bottom line in the third quarter as well. Delta expects operating margin to range between 11-13% in Q3 2022.

Capacity

For the third quarter of 2022, Delta forecasts capacity to be down 15-17% from the third quarter of 2019. In the second quarter of 2022, capacity was down 18% compared to the same period in 2019.

Costs

For Q3 2022, Delta expects non-fuel unit costs, or CASM-Ex, to be up 22% from the third quarter of 2019. The company expects fuel price to range between $3.45-3.60 per gallon in Q3. In Q2 2022, CASM-Ex of 12.76 cents was up 22% from the same period in 2019. Average fuel price per gallon stood at $3.82, up 85% from Q2 2019.

Click here to read Delta Air Lines’ Q2 2022 earnings conference call transcript