• Thu. Aug 4th, 2022

Delta CEO: Airline industry ‘overstretched’ post-pandemic (NYSE: DAL)

ByKimberly A. Brochu

Jul 13, 2022

Delta CEO Ed Bastian said on Wednesday that the company’s recent mixed earnings report was due to the airline industry “stretching” to capture as much demand as possible following the the pandemic, creating “a bit of operational stress.”

“We pushed too hard”, the boss of Delta Air Lines (NYSE: DAL) told CNBC. “We have reduced a bit, we have put our constraints in place. And in July, we are organizing an excellent operation.”

Bastian explained that coming out of the pandemic, airlines had been “starved for revenue over the past couple of years,” which led them to aggressively ramp up operations once COVID restrictions began to lift. This has led to complications, including highly publicized flight cancellations in the industry.

Bastian’s comments followed the release of a report on the mixed results. Delta (DAL) exceeded revenue forecasts, with revenue growing 94% over last year. However, the company’s bottom line fell short of expectations, amid soaring fuel costs and operational issues.

Looking ahead, the Delta chief said business travel is now “80% back” from pre-pandemic levels seen in 2019. However, he expects that to pick up after the summer.

Bastian noted that international travel still lags domestic travel, standing at around 60% of levels seen in 2019. Europe is the region closest to returning to pre-pandemic conditions, while the Asia is “quite far behind”, according to the head of Delta.

When it comes to ticket prices, Bastian sees no short-term moderation, due to high fuel costs and “really high” demand.

So far, major airlines have posted a volatile performance in 2022. Buoyed by strong post-pandemic demand, the industry has also faced significant headwinds, including high fuel prices and shortages of fuel. workforce.

In total, DAL has fallen by around 23% in 2022, with much of it taking place in the past six weeks or so. The American competitor (AAL) has seen a similar performance, falling around 21% for the year so far.

United (UAL) and Southwest (LUV) have held up better than many of their peers, despite posting year-to-date declines of 16% and 12%, respectively. Meanwhile, JetBlue (JBLU) has fallen 44% since late 2021.

For more on DAL’s outlook in a complicated economic environment, read a deep dive by Seeking Alpha contributor Juxtaposed Ideas, who sees a mixed outlook with “tailwinds for recovery with recessionary turbulence ahead.” .