Recap: Delta Air Lines reports 3rd-quarter earnings

Delta confirms that it's listening to customers who were incensed by changes it made to its SkyMiles loyalty program.

CEO Ed Bastian says, in fact, he agrees with some of the feedback on the SkyMiles changes.

He doesn't announce what those changes-to-the-changes might be, but says that people should stay tuned — that the airline has heard feedback and is adjusting the revamp. 

Bastian said some changes to the SkyMiles program still will end up happening. But he says there will be "modifications" to the changes that were part of the original announcement.

The revamped SkyMiles program would focus more on how much customers spend as opposed to how much they fly, something American Airlines also has done with its AAdvantage program. It's apparently going to adjust some of those changes, but the airline isn't ready to announce specifics just yet.

Delta Air Lines was asked by a Wall Street Journal reporter whether it considers Ozempic and other weight-loss drugs when planning for the future.

Some reports have said that if more people take the weight-loss drugs, that could mean the average passenger weighs less. Because a lighter plane is a cheaper plane to fly, that could boost airlines' profits.

But that's not in Delta's thinking just yet, its executives said on Thursday's call.

Does Delta take Ozempic into consideration? "No we don't," Bastian said.

Delta says corporate travel is growing strongly in the tech sector and the financial services sector — something Bastian says is happening as the companies work their way to the "new normal" in the wake of Covid.

He says Delta is in a better position to pick up that increased demand from business travelers because of its differentiated product: that is, corporate travelers are more likely to buy premium seats on Delta as opposed to the budget one-class carriers like Southwest and Allegiant.

Still, Bastian says the entertainment industry strikes in Los Angeles — where Delta maintains a strong presence — and auto industry strikes in Detroit, where it also maintains a strong presence, are having an effect on the airline. Delta says business is still strong in those two hubs, but the strikes have definitely affected travel.

High spenders are helping Delta's bottom line, with revenue from its premium products like Delta One up 17% over the same quarter last year, the airline's president says.

That's 5 percentage points higher than the main cabin, Delta President Glen Hauenstein says.

That means high spenders are even more important for the airline, especially as businesses push a return to the office. As more workers return to the office, they're also likely to return to the skies for business trips. And a lot of those business trips are taken in the premium cabin.

And workers who still have the opportunity to work from anywhere will likely continue to add a tailwind to Delta's numbers with "bleisure travel" — mixing business and leisure — creating demand that wasn't there before Covid.

Delta Air Lines CEO Ed Bastian acknowledges the "unfolding war in Israel" at the start of the call and says the airline is donating $1 million to the American Red Cross. He says inbound and outbound flights to Tel Aviv have been suspended through the end of the month. He calls the events "tragic and horrific."

Delta share rose 0.1% in early trading on Thursday after its third-quarter earnings report. The stock is now up 9.7% year-to-date.

3rd quarter

• Adjusted EPS $2.03 vs. $1.51 y/y, estimate $1.94
• EPS $1.72 vs. $1.08 y/y
• Adjusted revenue $14.55 billion, +13% y/y, estimate $14.55 billion
  • Passenger revenue $13.12 billion, +14% y/y, estimate $13.08 billion
  • Cargo revenue $154 million, -36% y/y, estimate $199.1 million
• Passenger load factor 88% vs. 87% y/y, estimate 86.9%
• Available seat miles 73.23 billion, +16% y/y, estimate 73.14 billion
• Revenue passenger miles 64.10 billion, +17% y/y, estimate 63.53 billion
• Adjusted net income $1.31 billion, +35% y/y, estimate $1.25 billion
• Yield per passenger mile 20.47c, -2.2% y/y

Full-year 2023 forecast

• Sees adjusted EPS $6 to $6.25, saw $6 to $7, estimate $6.03

Source: Bloomberg

3rd quarter

• Adjusted EPS estimate $1.94 (Bloomberg Consensus)
• EPS estimate $1.94
• Adjusted revenue estimate $14.55 billion
  • Passenger revenue estimate $13.08 billion
  • Cargo revenue estimate $199.1 million
• Passenger load factor estimate 86.9%
• Available seat miles estimate 73.1 billion
• Revenue passenger miles estimate 63.5 billion
• Adjusted net income estimate $1.25 billion

Full-year 2023

• Adjusted EPS estimate $6.03
• EPS estimate $6.03
• Adjusted revenue estimate $54.59 billion

Source: Bloomberg