Delta Air Lines reports a quarterly loss as fuel prices take a toll.
Delta Air Lines said Wednesday that it recorded a $940 million loss in the first three months of the year, as thriving ticket sales were offset by high fuel prices.
But the airline, which had expected a loss for the quarter, said that its March operations were profitable and that it had been able to pass some of the higher cost of fuel along to customers.
The company reported adjusted operating revenue of $8.2 billion, down 21 percent from the same quarter in 2019 and beating the forecast it issued at the start of the year. Delta said it expected revenue in the second quarter to be down only 3 to 7 percent from a similar period in 2019.
“With a strong rebound in demand as Omicron faded, we returned to profitability in the month of March,” said Ed Bastian, Delta’s chief executive officer, adding that the company was “successfully recapturing higher fuel prices.”
Delta said strong spring-break travel, office reopenings and the lifting of travel restrictions helped to improve demand in the first few months of the year.
Domestic corporate travel was about 70 percent recovered in March, compared to the same month in 2019. International business travel was about 50 percent restored. Delta also said that revenue from sales of premium seats on domestic flights had fully recovered to 2019 levels last month.
Higher jet fuel prices slowed that momentum, though. Delta reported paying an average price of $2.79 per gallon of fuel, up 33 percent from the last quarter of last year. That price included a saving of 7 cents per gallon thanks to the airline’s oil refinery outside Philadelphia. The refinery also collected nearly $1.2 billion in revenue from third-party sales.
On Wednesday, the airline said it expected the price of fuel to rise even higher, to between $3.20 and $3.35 per gallon. It expects seating capacity in the second quarter to be about 84 percent restored.
The industry started the year with widespread flight disruptions as winter storms and staffing shortages caused by the fast-spreading Omicron variant of the coronavirus hampered its ability to handle the busy holiday season. At Delta, for example, about 8,000 employees — more than one in 10 — called in sick, the airline revealed in January. At the time, Mr. Bastian estimated that the variant had delayed the airline recovery by about 60 days.
Delta in January said it expected losses that month and in February, with a return to profitability in March. While Delta had expected a loss over the first three months of this year, it projected profits throughout the rest of the year.
March started off strong, with several airlines reporting better-than-expected sales. But some of that improvement was dented by high fuel prices caused by Russia’s invasion of Ukraine and supply chain problems. Still, at an investor conference last month, American Airlines said it expected that the additional revenue would more than offset the rise in fuel prices.
At the same conference, Glen Hauenstein, the president of Delta, said the airline could “easily” increase fares in the second quarter to make up for rising fuel costs, recouping costs faster than normal because customers are booking flights closer to the date of travel. On an average one-way ticket price of about $200, the airline will need to recover $15 to $20, he said at the time. A United Airlines executive was similarly optimistic that the airline would be able to pass on fuel costs to customers in higher fares.
The industry turned a corner recently, according to an analysis by the Adobe Digital Economy Index. In February, for the first time since the pandemic began, ticket sales for domestic flights exceeded those for the same month in 2019, according to the analysis. The trend continued last month, with fares up 20 percent from March 2019, Adobe reported on Tuesday.
For the past several weeks, about two million people were screened daily at Transportation Security Administration security checkpoints, or about 90 percent as many as were screened over a similar period in 2019.
Delta was the first major U.S. airline to report its first-quarter performance. American and United plan to report earnings next week, with Southwest Airlines expected to follow the week after.
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