Issue Overview

Winter Heat

Winter Heat

October 17th, 2022 at 12:47 AM EDT
30 min read

Issue Overview

Third quarter earnings season is underway, with Delta as usual batting leadoff. For the second straight quarter, its earnings were strong, underscored by another double-digit operating margin. That’s thanks to record revenues, fueled by extraordinarily robust demand — for leisure travel, for premium products, for domestic and transatlantic travel, for cargo, for SkyMiles, and even, to some extent, for business travel. Now if only costs weren’t so high. Fuel costs are up, labor costs are up, maintenance costs are up, and, importantly, overall unit costs are up, swelled by suboptimal utilization of aircraft and other assets. Delta still flew 17 percent fewer seat miles last quarter than it did in the same quarter of 2019. These cost troubles explain why Delta’s 11 percent third quarter operating margin wasn’t as good as the 16 percent it earned three years earlier. It’s now telling investors to expect a margin of between 9-11 percent this quarter, compared to the 12 percent it managed in 2019.

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