Delta warns that rising fuel costs threaten profit rebound

Delta Air Lines Inc. reported the first quarterly profit excluding federal aid at a major U.S. carrier since the start of the pandemic but said rising jet fuel prices are a threat to staying in the black.

Delta Air Lines Inc. reported the first aid-free quarterly profit among big U.S. carriers since the start of the pandemic but said rising fuel costs pose a threat to staying in the black.

Earnings for the third quarter exceeded analysts’ expectations as the Atlanta-based airline overcame temporarily weaker demand amid coronavirus fears spurred by the delta variant. 

Net income, excluding US$1.3 billion in government aid, came to US$194 million, or 30 cents a share, the airline said Wednesday. Analysts had expected 17 cents, according to the average of estimates compiled by Bloomberg. Airlines have posted profits during the pandemic that were assisted by federal funds.

Delta warned that it may see a return to red ink in the current quarter, mainly because of higher jet-fuel costs, which it forecast rising as high as an average of US$2.40 a gallon, up from US$1.94 in the third quarter. 

“That’s going to be a limiter on our ability to post a profit in the quarter. At these current fuel levels, it looks like we’ll have a modest loss,” Chief Executive Officer Ed Bastian said in an interview. Fuel prices have risen 60 per cent this year, he said. 

Delta dropped 3.4 per cent to US$42.06 at 9:40 a.m. in New York after sliding 4 per cent, the most intraday since Sept 10. Other airlines slumped as well. Delta had gained 8.3 per cent this year through Tuesday, the worst performance in the S&P 500 Airlines Index.