Delta Air Lines CEO warns fuel costs could dig into profits

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Delta Air Lines’ biggest concern for the fourth quarter isn’t the “variant” — as CEO Ed Bastian put it — it’s the cost of fuel.

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big picture: Warnings like Delta are a natural result of global fuel chaos.

running news: Delta reported earnings on Wednesday, booking its first quarterly profit (without federal aid) since the start of the pandemic.

  • The company has several tailwinds. For one, there has been an increase in bookings – including for business travel – ever since COVID cases started declining last month.
  • Total revenue is expected to reach 75% of pre-pandemic levels by the end of the year, up from just 25% initially (and that’s without most international travel).
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But, but, but: How much jet fuel costs, and how long it stays there, will determine whether the airline makes a profit in Q4, Bastian told CNBC.

  • Fuel is Delta’s second largest personal cost after labor. “It’s up 60% this year, and about 20% just in the last month,” he said.

Bottom-line: Higher energy costs are likely to appear as a risk factor in more companies’ third quarter earnings comments.

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