Delta posts $695 million Q3 profit, expects big holiday rush

Delta Air Lines expects travelers will pack planes during the upcoming holidays despite higher fares and growing concerns over inflation and the economy.

Delta posted a profit Thursday of $695 million in the third quarter as higher fares this summer and a lucrative credit-card business more than offset higher fuel prices.

The airline forecast a bigger-than-expected profit in the fourth quarter, with revenue that it expects will top pre-pandemic levels. Delta’s CEO said he sees no indication that anxiety over inflation and the economy will discourage people from traveling over the holidays.

Delta’s shares climbed 4% and other airline stocks rose with them.

“It’s going to be a very strong holiday season — Thanksgiving, Christmas, New Year’s,” CEO Ed Bastian said in an interview. “Consumers are still relatively healthy.”

Delta’s third-quarter numbers support that view. The airline’s operating revenue rose 11% above 2019 levels even with an 18% drop in passenger traffic. That was possible because flights were nearly 90% full and the average passenger paid 23% more per mile than during the same months of 2019. Revenue from premium seats rose sharply.

The Atlanta carrier expects to earn between $1 and $1.25 per share on higher revenue in the fourth quarter, easily above Wall Street’s forecast of 79 cents, according to a FactSet survey.

Bastian said advanced bookings — typically three or four months into the future — and comments from big corporate customers point to “very strong” travel demand through the fourth quarter and into early next year.

“I can’t speak for the broader economy,” he said on a call with analysts and reporters. “I know there is some pretty significant macro shifts going on in spending — out of goods and into services — which we are a beneficiary of … we’re glad to see people back on the road.”

Some analysts are more cautious about airlines withstanding economic turbulence. An outsized share of air travel is being done for leisure by people who are now spending much more for basics like food and housing.

“As consumers spend excess savings and make up for lost travel, our analysis suggests that demand will wane for leisure travel,” said Christopher Raite of Third Bridge. He said that will make it even more important that business travel recovers despite alternatives including Zoom meetings. Delta said business travel is at about 80% of 2019 levels.

Summer got off to a rocky start for U.S….