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Delta stocks plunge on rising costs pressures

Shares of Delta Air Lines edged lower on Thursday’s pre-market trading after the company warned that cost pressures would remain elevated throughout the year.

The Georgia-based firm has lost 4.47% or 1.39 points to $29.70 per share. This move trailed Wednesday’s downturn of 1.04% or 0.31 points to $29.39 apiece.

American carriers currently benefitted from the strongest summer travel season in three years as more people resumed regular activities. In line with this, international traffic and corporate travel demand rebounded, making for a profitable second quarter for airlines.

However, the industry slashed thousands of workers at the height of the coronavirus pandemic in 2020. This has left the firms ill-equipped to deal with a surge in consumer demand. Correspondingly, carriers struggled to ramp up capacity and get operations back on a smoother track, resulting in higher operational costs.

Last month, Delta had to cancel 3.50% of its scheduled flights. Flight disruptions and higher fuel costs resulted in a profit below Wall Street estimates. Specifically, in the second quarter, its earnings posted at $1.44 per share, lower than the consensus of $1.73.

Nevertheless, the airline published a revenue of $13.82 billion, surpassing the $13.57 billion expected amid easing COVID restrictions. The domestic corporate travel sales recovered 80.00% from the pre-pandemic period. This rebound represented a hike of 25.00% from the first quarter of the year.

Accordingly, Delta is the first US airline to report earnings for the second quarter. United Airlines and American Airlines will announce their results next week.

Delta expects third-quarter profit

Meanwhile, Delta expects third-quarter profit, anticipating sales to increase by 1.00% to 5.00% compared with three years ago. Then, it reiterated its forecast for full-year profitability. This positive outlook indicated a sign of confidence that it expects fares to remain elevated.

Subsequently, the costs for each seat it flew a mile, excluding fuel, were up 22.00% from 2019. Then, its fuel expense edged up 41.00% from three years ago to $3.20 billion. Airlines compare their results to 2019 to show their progress in getting back to pre-pandemic performance.

However, Delta still grappled with a staffing shortage, exacerbating routine issues. In addition, the bad weather drove up the rates of flight cancellations and delays.

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