Delta Air Lines enjoyed record revenue during the third quarter as high ticket prices, surging premium demand and high load factors made up for a schedule that remained considerably smaller than in the summer of 2019.
But while the carrier projects demand to remain strong for the foreseeable future, capacity growth between now and next summer should allow Delta to sell more seats at price points targeted toward budget travelers.
"We're going to be bringing more affordability," said CEO Ed Bastian, who addressed investors on an earnings call Thursday morning.
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Delta flew 17% fewer seat miles during the September quarter than it did in in 2019, but it expects to have its network restored to the 2019 level by next summer. The build-up, much of it centered on domestic hubs, will allow the carrier to release more lower-priced inventory, Bastian explained, even while maintaining high overall yields.
For the third quarter, Delta reported record yield, defined by how much it earned on average per mile that a passenger flew, topping the summer 2019 quarter by a robust 23%. High demand, coupled with reduced capacity, drove ticket prices up. Premium demand, in particular, remained high, outperforming main-cabin revenue growth by 10 percentage points.
Record revenue for a quarter
The Atlanta-based carrier also reported a record quarter in terms of total revenue, raking in $14 billion, which bested the September quarter of 2019 by 11%. Assisting with that figure was $1.4 billion in co-branded credit card revenue from American Express, an increase of 37% over 2019. Load factor was strong at 87%, down 1 percentage point from 2019.
Costs, though, continued to drag down Delta's overall profitability.
For the quarter, Delta reported net income of $695 million, down 54% from the same period in 2019, as fuel prices of 84% more per gallon drove a $2 billion increase in costs despite the lower capacity the airline offered.
For the current quarter, which ends in December, Delta expects revenues to be 5% to 9% more than 2019 while flying 8% to 9% less capacity.
Bastian said that the U.S. airline industry is positioned to continue thriving, even in the case of a recession. That's in part because shortages in available pilots and other workers this year, combined with a raft of aircraft delivery delays, has prevented airlines from flying at the levels that the market called for.
"Demand has not come close to being quenched by a hectic travel season," he said.