Travel demand boosts Delta results but labor costs dent profit forecast

Delta Air Lines on Friday reported better-than-expected results in the final months of 2022, helped by strong consumer demand, although it expects labor costs to weigh on first quarter profits this year.

Like its rivals, the US air carrier has benefited from a recovery in appetite for air travel after two years of a pandemic-related slowdown.

In the October to December quarter, the company posted revenue of $12.3 billion, eight percent up from its 2019 pre-Covid level.

"As we move into 2023, the industry backdrop for air travel remains favorable and Delta is well positioned to deliver significant earnings and free cash flow growth," said Delta's chief executive officer Ed Bastian in a statement.

For the full year of 2022, Delta's revenue came in at $45.6 billion, slightly below expectations and down two percent from 2019, the carrier said.

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But towards year-end, "fuel prices came down a little bit and gave us a little bit of benefit," Bastian told CNBC Friday.

Looking ahead, Delta expects labor costs to weigh on profits in early 2023.

Delta forecasts an earning of 15 cents to 40 cents a share in the first three months this year, and for revenue to be up 14 percent to 17 percent from 2019.

But "for the March quarter, we expect non-fuel unit costs to increase three to four percent year-over-year," said Delta chief financial officer Dan Janki.

This includes a "full quarter impact from labor cost increases and finalizing the rebuild of our network for the peak summer period," he said.

While the company did not fully detail the financial impact of a cold snap in late 2022 that disrupted flights in the United States, CEO Bastian acknowledged "difficult holiday conditions" in the CNBC interview.

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There were many customers looking for airlines given challenges that Southwest Airlines faced, and "we got a benefit from that," helping to offset Delta's hit from the weather when it had to reduce some capacity.

Major US airlines returned to normal operations after a few days with the exception of Southwest, which was forced to cancel over 16,700 flights between December 21 and New Year's Eve.

Source: AFP