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.
RELATED: Delta
Q2 results