Delta’s profit drop says something about the industry

Delta Air Lines reported a 29% drop in profits from a year earlier for the second quarter despite bumper summer air travel.

Despite achieving a record revenue of $16.66 billion, up 7% from last year, driven by strong demand reflected in record TSA screenings—exceeding 3 million travelers on a single day on the Sunday after July Fourth—Delta faces challenges amid economic disparities exacerbated by high inflation.

Higher operational costs due to increasing fuel prices, overhiring and added flight options after the pandemic, and widespread fare discounts across the industry are some of the reasons why the most profitable American airline saw its earnings fall to roughly $1.31 billion from $1.83 billion a year earlier.

The Q2 report caused Delta’s stock to plunge 6%, dragging down competitors like JetBlue, American, United and Southwest by 3% to 6%.

Looking forward, the airline plans to moderate its capacity growth in the upcoming quarter to between 5% and 6%, aiming to align with sustainable growth. Delta CEO Ed Bastian plans to scale back flight schedules to restore balance by the end of August.

Delta and United emerged as top earners, catering to affluent travelers and business sectors, while budget carriers like Southwest struggled with losses and price cuts to fill seats.