Delta Air Lines cuts 2024 profit outlook on supply chain, economic risks

By Rajesh Kumar Singh

CHICAGO (Reuters) - Delta Air Lines on Friday scaled down its profit outlook for the current year, citing supply chain issues and macroeconomic uncertainties, sending its shares down 5% in premarket trading.

Strong holiday demand, however, helped the company beat Wall Street's fourth-quarter earnings estimates.

The Atlanta-based carrier now expects an adjusted profit of $6 to $7 per share this year, compared with its previous target of more than $7 per share outlined at an investor day in December 2022.

The 2024 estimate compares with analysts' expectations of $6.50 per share, according to LSEG data.

In an interview, Delta CEO Ed Bastian said the company still had an internal goal of producing earnings of more than $7 a share, but it was offering an outlook to the market that it had "a good deal of confidence in."

"With the amount of uncertainty that continues to exist within the supply chain, in the maintenance arena, within the economic outlook, we wanted to be prudent," Bastian told Reuters. "But that doesn't mean we can't out-produce it."

For the first quarter, the company forecast an adjusted profit of $0.25 to $0.50 per share. That compares with Wall Street's estimates of $0.38 a share.

Airlines are still grappling with supply-chain problems that have impacted aircraft deliveries and forced them to fly older planes longer than expected, driving up maintenance and repair costs. Delta's aircraft maintenance costs were up 23% last year from the prior year.

Bastian said maintenance expenses will remain higher until the supply chain sorts out issues such as labor shortages, quality control and inflation.

"It's going to be a multi-year period of time before the overall level of maintenance support and efficiency gets back to pre-pandemic levels," he said.

There also have been lingering concerns about travel spending as rising costs of living are stretching household budgets.

Bastian, however, said the company continued to see strong demand in all markets, adding the airline recorded its highest-ever bookings this week.

While demand for transatlantic travel is expected to cool down from a year ago, it will likely remain healthy, he said.

Transatlantic travel is the U.S. airline industry's most lucrative long-haul market. It accounted for about 19% of Delta's passenger revenue last year.

The company also announced a deal with Airbus to buy 20 A350-1000 widebody aircraft for deliveries beginning in 2026, confirming a Reuters story.

Delta said it also had options to purchase 20 additional widebody jets from the European planemaker.

Adjusted profit for the fourth quarter came in at $1.28 per share, topping analysts' expectations of $1.17 per share, according to LSEG data.

(Reporting by Rajesh Kumar Singh, Additional reporting by Shivansh Tiwary; Editing by Jamie Freed)