Delta gains from MAX grounding and high demand
Carrier raises profit outlook for 2019 amid robust summer bookings
Delta Air Lines Inc. raised its profit outlook for this year, as strong travel demand and the diminished capacity of competitors with grounded Boeing Co. 737 MAX jets buoyed the thirdbiggest U.S. carrier.
The first major U.S. airline to report earnings for the recently ended quarter said revenue rose 8.7% from a year ago to a record $12.5 billion. Unit revenue, a closely watched measure of how much airlines earn for each seat flown a mile, rose 3.8%.
“The momentum is really strong,” Delta Chief Executive Ed Bastian said in an interview. “Forward bookings for the rest of the summer look strong.”
Delta shares rose 1.1% on Thursday to $61.14.
This summer is expected to be one of the busiest ever for air travel, and Delta is better positioned than some other U.S. airlines to benefit because it doesn’t operate any Boeing MAX planes. Regulators grounded the aircraft in March after two fatal crashes that killed 346 people aboard Ethiopian Airlines and Lion Air flights.
The grounding has obliged Delta’s largest competitors— American Airlines Group Inc., Southwest Airlines Co. and United Airlines Holdings Inc.—to strike thousands of flights from their schedules during the busiest time of the year for airlines.
Delta said flying capacity expanded by 4.7% during the second quarter, while American reported this week that its capacity shrank during the quarter.
Atlanta-based Delta’s adjusted net income totaled $1.53 billion in the second quarter, or $2.35 a share, ahead of the $2.28 a share analysts estimated, according to FactSet.
Delta said it would increase its quarterly dividend by 15% to 40.25 cents a share. The airline raised its 2019 profit guidance to between $6.75 and $7.25 a share, up from $6 to $7 a share previously.
Mr. Bastian said the impact of the MAX grounding on other airlines gave Delta only a small boost. He said much of Delta’s sales growth during the quarter came from lucrative business and first-class tickets and the airline’s loyalty program, including a revamped agreement with American Express.
He said Delta’s competitors have kept up service on their most competitive routes by reshuffling their networks and subbing in other planes.
Analysts have said the grounding of the MAX has limited capacity growth and bolstered pricing for the entire industry—a silver lining for airlines, if not for passengers. American on Wednesday raised its unit revenue expectations for the second quarter, citing fuller flights, though it said it expects to record a $185 million hit to pretax earnings because of the grounding. American is expected to report second-quarter earnings later this month.