Delta 2023 earnings forecast sees ‘robust’ travel demand

The airline expects adjusted earnings to nearly double next year to $6 a share, above analyst estimates. Revenue in 2023 is projected to increase 15% to 20% from this year to approximately $45.5 billion.

Free cash flow is likely to grow from over $2 billion next year to over $4 billion in 2024, a significant rebound from Delta’s record losses in 2020.. Delta Air Lines plans to repay more of its debt over the next two years.

Executives at Delta Air Lines and other airlines have been optimistic about a rebound in travel demand in recent weeks.

“We have seen a recession first hand,” CEO Ed Bastian said in an interview. increase.”

Delta Air Lines on Wednesday raised its fourth-quarter earnings guidance to $1 to $1.25 per share, to a range of $1.35 to $1.40 per share. Total revenue is expected to be 7% to 8% higher than in the fourth quarter of 2019 prior to the Covid pandemic.

Delta shares were up almost 2.8% on Wednesday to close at $34.31, but the broader market fell. Delta shares are down 12% this year.

The U.S. airline industry returned to profitability this year as travel demand rebounded sharply and consumers showed willingness to pay higher fares.

Fares have remained strong as airlines have been forced to cut some routes and curtail planned capacity expansion. Supply chain and workforce constraints have delayed the delivery of new aircraft, and airlines continue to suffer from a shortage of trained pilots.

Bastian told CNBC that business travel has recovered about 80% to 2019 levels, with demand from small businesses even stronger than before the pandemic.

“There will be no return to what it was before, but there will be new forms of travel that will make up for it,” he said.

Some operators have warned of slowing business growth and weakness.

united airlines CEO Scott Kirby said last week that demand for business travel has “flatten” but revenue is still growing. Alaska Airlines said in a filing on Tuesday that fourth-quarter demand was strong, but indicated “a slight softening in corporate travel bookings.”

When jetblue airlinessaid the “very strong” last-minute demand expected in December was “below expectations.”

However, Delta’s bookings remain strong through early 2023, Bastian said.

Delta has been more conservative in restoring capacity than some of its competitors, but the Atlanta-based airline aims to bring its network back to 2019 levels next summer.

U.S. airfares have eased from peaks earlier this year, but prices are still well above 2021 levels.

Bastien said a recovery in supply would likely “relax the pressure on fare mix a little bit”, but strong demand will continue to boost earnings.