Delta Air Lines forecasts strong quarter amid travel demand surge

Travel demand surge: US-based Delta Air Lines is optimistic about the current quarter after exceeding Wall Street expectations in its first-quarter earnings, driven by robust travel demand. The airline anticipates an adjusted profit of $2.20 to $2.50 per share for the quarter ending in June, with an operating margin of 14 per cent to 15 per cent and a 5 per cent to 7 per cent year-on-year revenue increase.

CEO Ed Bastian expressed confidence in the company's momentum, reaffirming a profit forecast of $6 to $7 per share for 2024 and a free cash flow of $3 billion to $4 billion.

Global travel demand remains strong, with the International Air Transport Association (IATA) forecasting 4.7 billion travellers in 2024, up from 4.5 billion in 2019. In the US, passenger traffic is expected to reach record levels this year.

Despite the positive outlook, airlines are facing plane shortages, limiting their ability to add more seats during peak travel periods, which is leading to stronger pricing.

Delta reported a 6 per cent increase in revenue in the March quarter, driven by strong bookings for international trips and increased travel spending by technology and financial services firms.

The airline expects strong travel demand to continue in the June quarter, with flat unit revenue compared to last year in all regions except Latin America. Delta's domestic unit revenue turned positive in the March quarter, showing a 7 per cent improvement from the previous quarter.

The airline's shares have risen approximately 18 per cent this year, outperforming the NYSE Arca Airline index, which is down 3 per cent compared to a 9 per cent gain on the S&P 500. Non-fuel costs rose less than expected in the March quarter, with Delta anticipating a 2 per cent year-on-year increase in the current quarter. Adjusted profit for the first quarter was 45 cents per share, surpassing analysts' expectations of 36 cents per share.

(with Reuters inputs)