Delta boss wary of rising fuel prices

Delta Air Lines expects revenues to hit more than 70 percent of 2019 levels in the December quarter but chief executive Ed Bastian has warned rising fuel costs are undermining profitability. Delta recorded its first quarterly profit since the start of the pandemic in the September quarter with a pre-tax result of $US216 million when $US1.3 billion in government payroll support was excluded. Rising demand saw revenues for the quarter reach two-thirds of pre-COVID levels after starting the year at just 25 percent. READ: Gossamer wings take solar Airbus drone to record height Domestic passenger revenue was restored to 72 percent of pre-COVID levels, up 17 points on the June quarter, while international passenger revenue recovered to 42 percent. “This was led by strong consumer demand, growing improvement in business and international travel, and reflected the resilience of some of our diverse revenue streams which are already back to or higher than pre-pandemic levels,’’ Bastian told analysts. The delta boss said restoring the remaining third of the company’s revenue base was dependent on further business and international demand improvement. “While the recovery in business travel paused in August and early September as case counts increased, demand has picked up since Labor Day,’’ he said. “Last week was our top corporate revenue booking week since the start of the pandemic. “And with the announcement that U.S. borders will open in November, bookings from Europe and Brazil to the U.S. are rapidly improving.” While demand continued to improve, however, Bastian warned the recent rise in fuel prices would pressure the airline’s ability to remain profitable for the December quarter but noted there was clear underlying momentum in the company. “As those fundamentals improve, we also see fuel prices continue to rise, which will pressure our ability to remain profitable in the December quarter,’’ he said. “At the present time, we're expecting a modest loss in the fourth quarter with crude prices driving that up nearly 60 percent year-to-date and more than 15 percent just over the last month. ” While we operate in a volatile and uncertain environment, I have the utmost confidence in our return to sustained profitability as the recovery progresses into the new year.” Bastian said Delta remained disciplined about how it was rebuilding its network, prioritizing operations and matching supply with demand. “A measured approach to restoring capacity is critical to delivering for our customers and to managing through an environment of rising fuel prices,’’ he said.