Delta Cautions About Potential Revenue Impact From US Presidential Election

Delta Air Lines is bracing itself for a bumpy ride through the stormy skies of the US presidential election. But fear not, this airline giant is expecting to land with one of its most profitable fourth quarters ever. Delta has forecasted an adjusted profit of $1.60 to $1.85 per share for the quarter concluding in December—all the while navigating the electoral turbulence.

Impact of the U.S. Presidential Election

The upcoming election on November 5th has all the suspense of a political thriller. However, this drama comes with its own financial cliffhanger for Delta, with the anticipation of a 1 percentage point dip in unit revenue in the December quarter. It’s expected that the travel appetite of many will momentarily wane, as attentions are glued to election results rather than boarding passes.

Holiday Bookings and Sweet Pricing

Luckily, Delta has some festive cheer in the form of strong holiday bookings and the deft handling of pricing power. October and December are looking quite merry, promising a stronger revenue performance compared to the relatively subdued November period.

Capacity and Revenue Growth

Delta is expecting a 2% to 4% revenue lift-off this quarter, spurred by a capacity increase of 3% to 4%. A collaborative moderation of capacity by U.S. airlines has allowed for improved pricing power, spelling profitability along the routes.

Third-Quarter Performance: A Tale of Cyber Woes

The third quarter saw Delta taking a slight detour with an adjusted profit of $1.50 per share, missing the $1.52 per share target set by analysts. This slight slip was thanks to an unscheduled adventure through cyber chaos, hampered by a global cyber outage courtesy of a minor software glitch by CrowdStrike.

Flight Disruptions: Not So Smooth Sailing

The aforementioned cyber hiccup resulted in 7,000 flights being grounded over five frustrating days, with 1.3 million passengers marooned and stunned. This tech turbulence cost Delta a cool 45 cents per share in the third-quarter profit.

Industry Trends: Flying High

Despite the occasional tech gremlin, the industry’s skies are clearing. With reduced capacity and a drop in jet fuel prices (down 25% in North America year-on-year), the earnings forecast is looking brighter. Investors have taken note, sending the NYSE Arca Airline index soaring by 25% since the dog days of summer in early August.

Stock Performance: Show Me the Money

Delta’s stock has been plotting its upward trajectory, gaining over 30% in recent times. Investor confidence is clearly at a cruising altitude, reflecting the airline’s strong hold on the passenger transportation map.

Analyst Views: Calculated Optimism

Analysts, paying keen attention from the flight deck (or their desks at TD Cowen), have noted the election-related revenue impact might be more significant than previously thought. Nonetheless, they’re still predicting Delta’s fourth-quarter revenue to climb, coupled with a robust EBIT margin.

In conclusion, while the election may pose a brief interruption in Delta’s current flight path, the robust booking and pricing strategies appear more than ready to mitigate the turbulence. Delta is equipped to maneuver through the storm with grace and, fingers crossed, record-breaking profits.