How Is Delta Expected To Perform Operationally In Q3?

Along with its August monthly metric report, Delta Air Lines (NYSE:DAL) decided to update its September quarter financial outlook. Since the company did not report individual metric figures for August, we will concentrate more on the company’s Q3 guidance in this report.

Financial Guidance:

• The company has updated its unit revenue guidance for Q3. Delta now expects the metric to lie within the 2-3% range, as the recovery in domestic close-in yields has been slower than expected.
• In terms of fuel costs, the airline expects to post a cost figure that is expected to range in the $1.68-$1.73 range. The costs are driven primarily by the increase in oil market prices that began in late July.
• Delta now expects the CASM (or cost per available seat mile) to come in around 2% higher y-o-y. This is mainly due to increased wage and repair costs.
• Lastly, the company expects to see an operating margin of about 16.5-17.5%, down from the previous estimate of 18-20%. The revision was deemed necessary as higher fuel prices and close-in yield softness resulted in a 2 point margin pressure in the quarter.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Delta Airlines

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