Delta Expects Strong Q4 Corp. Demand

Delta Air Lines has “growing confidence” that though there will be changes in corporate travel, it will “fully recover and increased workplace flexibility is creating new travel patterns,” Delta president Glen Hauenstein said during a Thursday third-quarter earnings call.

The company reported that corporate sales “are at the strongest recovery rates since the start of the pandemic,” and ended the third quarter at 80 percent of 2019 levels, according to a U.S. Securities and Exchange Commission filing. Further, a recently completed survey of Delta’s corporate customers “validates our perspective” on corporate recovery as nearly 90 percent of accounts expect their travel to stay the same or increase in the fourth quarter compared with the third quarter.

“Business travel continues to recover in line with our expectations as bookings have improved after Labor Day and companies reconnect with their teams and their customers,” Delta CEO Ed Bastian said. “From what we can see and what our big corporates are telling us is that the travel sector of the economy is going to be very strong through the quarter and into the new year.”

Delta expects corporate revenue recovery in the fourth quarter in the “low- to mid-80s at a system level” compared with 2019 levels, with traffic about 10 points below that, Hauenstein said. He added that less recovered sectors like banking, consulting and consumer services “have all seen double-digit growth post Labor Day, helping bring New York largely in line with the domestic system.”

But the places to and times when people are traveling is shifting—even for business travel—and Delta is making those adjustments, Hauenstein said. “Sunday night outbound, Monday morning outbound used to be the peak,” he added. “That’s now bleeding into Tuesday: out Tuesday, back Thursday. So some shorter trips midweek.” He noted this was due to customers mixing business and leisure trips. 

Whether business or leisure travel, the carrier continued to see strong premium demand. This quarter, premium revenue was up 8 percent versus 2019, 10 points higher than main cabin revenue growth, and a record 54 percent of total revenue was generated by premium products and diverse revenue streams, Hauenstein said, with the expectation that portion will grow to 60 percent by 2024. 

For premium, Delta sees “continued runway ahead with the return of business travel,” complementing the continued strength in premium leisure. Further, the “intent to repurchase” such products is more than 70 percent among all current premium-class users, he added.

Q3 Metrics and Outlook

Delta reported Q3 operating revenue of $13.98 billion, with $11.46 billion from passenger revenue, slightly above Q3 2019’s $11.41 billion. Domestic passenger revenue was up 2 percent and Atlantic 12 percent compared with 2019 levels. Latin America was down just 2 percent, while the Pacific region was off 51 percent. 

Net income was $695 million, down 54 percent compared with the same period in 2019. Average fuel price per gallon was $3.57, compared with $1.94 three years ago. 

Guidance for Q4 shows revenue is expected to be up in the range of 5 percent to 9 percent compared with the same quarter in 2019, based on “corporate travel improving and robust domestic and international demand,” Hauenstein said in the SEC filing. Capacity is anticipated to be down between 8 percent and 9 percent. Average fuel price per gallon is expected to be in the range of $3.35 to $3.55.

During the quarter, Delta consolidated and rebranded its corporate tools as Delta Business. In late September, the U.S. Department of Transportation approved and granted antitrust immunity to the trans-American joint venture between Delta and Latam. On Oct. 11, Delta announced its $60 million investment in and agreement with Joby Aviation, an electric vertical take-off and landing vehicle developer. On Oct. 12, Delta and Starbucks announced a new strategic loyalty partnership between Delta SkyMiles and Starbucks Rewards that allows members to link accounts and have more ways to earn rewards.

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