Delta results show strong demand and cost pressures

This content was published on Jul 13, 2022 – 16:38
July 13, 2022 – 16:38

(AFP)

Delta Air Lines shares fell on Wednesday as rising costs weighed on quarterly earnings despite strong demand that appears to be fighting inflation so far.

The US airline giant posted strong operating profit in the second quarter and said it was on track for a “big profit for the full year”. A better outlook after the sharp decline due to the pandemic.

Third-quarter profit was $735 million and revenue was $13.8 billion.

But the results do not match the expectations of analysts, who wonder when Delta expects to control costs and stabilize operations.

Shares fell 6.6 percent to $29.02 at midday.

In addition to a 41% increase in fuel costs compared to 2019, the airline experienced a rise in labor costs, due in part to increased overtime pay and labor shortages across the sector.

“The problems we’re having are temporary,” said Ed Bastian, the company’s CEO, referring to a six-week period in the quarter that just ended that saw many flight cancellations and delays.

Company executives said cost pressures should ease in the second half of the year as Delta postpones growth plans and focuses on improving operations.

Part of the problem has been the hiring of about 18,000 new employees since the pandemic.

Bastian said the airline has done a good job hiring, but that there is a learning curve with new hires that will have to go down as employees gain experience.

Delta’s results were announced shortly before the release of the Labor Department’s report on US inflation, which reported a June figure of 9.1% in the past 12 months.

Inflation will reduce the disposable income of families, especially those with lower incomes.