Delta Air Lines Delivers a Profit, but Faces Fuel-Cost Pressure

Delta Air Lines Inc.

DAL -4.80%

posted a quarterly revenue as journey demand started to get well in current weeks regardless of the unfold of a extra contagious Covid-19 variant, although the corporate mentioned it faces strain from rising gas costs.

Delta on Wednesday reported a third-quarter revenue of $1.2 billion. It was the airline’s second quarterly revenue because the pandemic started and the primary time that it earned cash with out together with authorities assist. Excluding that and different objects, Delta posted an adjusted revenue of $194 million.

Travel demand roared again this summer time earlier than the unfold of the Delta variant threatened to carry airways’ restoration to an abrupt halt. While “the variant”—as Delta Air Lines refers to it—brought on bookings to gradual and income to dip, the influence was modest and non permanent, Chief Executive Officer

Ed Bastian

mentioned in an interview.

“We didn’t get derailed by the variant,” he mentioned.

While airways tempered their outlooks and in the reduction of on flying because the variant brought on folks to carry off on making journey plans and cancel current journeys, carriers have mentioned just lately that demand has stabilized or began to return.

American Airlines Group Inc.

mentioned Tuesday that its third-quarter income will probably be 25% under 2019 ranges, “on the better end” of what the corporate had beforehand anticipated.

Mr. Bastian mentioned bookings have been rising prior to now 5 weeks and company journey bookings have reached a recent pandemic excessive. Domestic enterprise volumes are near 50% recovered as of final week, he mentioned, albeit not as robust because the airline had been hoping for earlier than corporations began to delay returning to places of work.

In the fourth quarter, Delta mentioned it expects its revenues to be greater than 70% recovered from 2019, up from 66% recovered within the third quarter. Demand for vacation journey seems robust and the reopening of worldwide journey will add to demand in coming months, he mentioned. The U.S. has mentioned it plans to take away journey bans that barred folks from a number of international locations from getting into the U.S., and as a substitute would require that non-Americans arriving from overseas present proof of vaccination.

Still, airways will face new challenges conserving a lid on their prices, with gas costs and different prices set to rise, analysts say. Delta mentioned it expects larger gas costs to undercut its revenue within the fourth quarter. The airline expects jet-fuel costs between $2.25 and $2.40 a gallon within the quarter, up from $1.94 within the third quarter.

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In the previous, airways have been in a position to move on larger gas prices to clients by rising fares, but there may be typically a lag and it’s unclear if clients will probably be extra worth delicate as they return to journey.

“In the short term, that’s our biggest inflationary pressure,” Mr. Bastian mentioned.

Airlines have had some operational stumbles as journey has rebounded and have raced to rent extra employees. While Delta delayed and canceled fewer flights than main rivals over the summer time, its clients typically encountered hourslong waits for customer support over the cellphone, one thing the airline has been working to repair.

Mr. Bastian mentioned Delta has made progress, but will probably be one other two to a few months earlier than the difficulty is resolved. Delta has up to now employed greater than 8,000 employees throughout the yr and the airline isn’t having hassle discovering new workers, he mentioned.

President Biden unveiled a six-pronged technique to fight the Delta variant of Covid-19 that ramps up vaccine necessities for employers with 100 or extra employees, these within the medical discipline and federal employees. Photo: Brendan Smialowski/AFP/Getty Images

While different main carriers have introduced they may require staff to be vaccinated towards Covid-19 to adjust to new guidelines for federal contractors—together with airways—Delta has held off. Mr. Bastian mentioned Delta would adjust to federal necessities, but believes its insurance policies are working to steer folks to get pictures.

Delta has began requiring unvaccinated staff to bear common testing, and subsequent month it’s going to begin charging them an additional $200 a month for medical insurance. Since that plan was introduced, Delta’s vaccination fee has climbed from about 75% of staff to 90%, Mr. Bastian mentioned. The airline expects to have 95% of its staff vaccinated by November. Factoring in individuals who will probably be granted exemptions for non secular or medical causes, only a few holdouts will probably stay, he mentioned.

As a consequence, Mr. Bastian mentioned he isn’t involved about any disruptions over the vacation season.

Unions that characterize pilots at American and

Southwest Airlines Co.

have mentioned there may very well be issues over the busy vacation season if pilots who object to vaccination are terminated, resulting in staffing shortages.

“We’re going to be well above the threshold for any disruptive activities,” Mr. Bastian mentioned.

Delta reported an adjusted revenue of 30 cents a share excluding the federal government assist, beating the 15 cents a share revenue analysts anticipated, in accordance with FactSet.

Write to Alison Sider at alison.sider@wsj.com

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