Delta Air warns of pre-tax loss in fourth quarter due to rising fuel prices

Oct. 13 (Reuters) – Delta Air Lines Inc (DAL.N) warned Wednesday of a pre-tax loss for the fourth quarter as fuel prices surged, pushing stocks lower before the bell.

Oil prices have risen to multi-year highs, threatening the pace of the recovery in the aviation sector. Fuel costs alone accounted for nearly 20% of Delta’s adjusted operating expenses in the third quarter.

Delta’s shares fell 1.24% to $43 in pre-market trading.

The airline expects to benefit from strong demand for vacations and an improvement in international and business travel as the United States reopens its borders in November to fully vaccinated travelers from 33 countries, including China and most of Europe.

As a result, Chief Executive Ed Bastian said 2022 will be a good year for recovery after the coronavirus pandemic plunged air traffic into its worst ever downturn.

“As restrictions are lifted, we will see significant demand,” Bastian said in an interview. “There is a lot of interest and a lot of demand, not only for consumers, but also for companies entering the US”

While domestic passenger revenues were 72% from the comparable period in 2019 in the third quarter, international passenger revenues recovered to 42% of pre-pandemic levels, the airline said.

Bastian said the company’s revenue is expected to return to 2019 levels by 2023.

Delta, the first major U.S. carrier to report third-quarter financial results, forecasts an adjusted fuel price per gallon between $2.25 and $2.40 for the fourth quarter. The adjusted fuel price per gallon was $1.94 in the last quarter.

Adjusted revenue for the third quarter was down 34% to $8.28 billion as of 2019, as a high-growth Delta variant reduced air travel demand in August and early September.

Net income declined to $1.21 billion, or $1.89 per share, in the three months ended September 30, from $1.50 billion, or $2.31 per share, in 2019.

Excluding items, the company made $194 million, or 30 cents per share.

Reporting by Sanjana Shivdas in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Anil D’Silva and Jane Merriman

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