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Author: Alan LittleDate: 2021-10-14

Delta Air Lines (DAL) -4% as fuel price rise threatens profitability

Delta Air Lines (DAL) traded down in New York on Wednesday after it warned that it could struggle to turn a full-year profit due to the high cost of fuel.

Delta Air Lines (DAL) dipped 4% during trading on Wednesday as a warning about full-year profitability amid a sharp rise in fuel prices took the shine off its impressive Q3 beats.

The American airline, which is headquartered in Atlanta, Georgia, surged past the Wall Street consensus for the three months to 31st September as earnings per share came in at $0.30 compared to the $3.30 loss 12 months ago.

Group revenues also skyrocketed 200% to $9.15bn during the same period to easily trump the $8.39bn forecasts, though that figure was 27% shy of pre-pandemic levels.

While Delta expects flight capacity to rise to approximately 80% of the levels recorded in 2019 in the coming months, soaring fuel costs will dull the positive impact of that trend and hit the company’s bottom line.

CEO Ed Bastian was upbeat in a statement released in midweek though as he praised Delta’s “industry-leading operational performance” and milestone quarter following its first profit since early 2020.

However, investors will have taken note of his warning that oil prices, which have risen to levels not seen since 2014, will “pressure” its ability “to remain profitable” in Q4.

Bastian has no doubts about Delta’s “path to sustained profitability” in the long term though as it looks to leverage its “best-in-class service” and brand power while generally making the airline more efficient.

Delta shares retreated after the morning bell in New York on Wednesday with the 4.20% decline by mid-morning setting a new $41.71 price.

American Airlines (AAL) fell 2.07% to $19.87 on the Nasdaq despite an encouraging Q3 report that showed a narrower loss than anticipated.

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