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Delta Air Lines Stock Slides As Fuel Cost Surge Clouds Q3 Earnings Beat

Delta Airlines said travel demand continued to improve in Q3, but noted that a surge in jet fuel prices would likely lead to a pre-tax loss over the final months of the year.

Delta Air Lines Inc.  (DAL) - Get Delta Air Lines, Inc. Report shares slumped lower Wednesday after the carrier posted stronger-than-expected third quarter earnings but cautioned that surging fuel prices would likely lead to a pre-tax loss over the final months of the year.

Delta said adjusted earnings for the three months ending in September was pegged at 30 cents cents per share, up from a loss of $3.30 per share over the same period last year and 13 cents ahead of the Street consensus forecast. Group revenues, Delta said, surged 200% to $9.15 billion, well ahead of analysts' estimates of an $8.39 billion tally, but still around 27% lower than 2019 levels.

Looking into the final months of the year, Delta said it sees capacity restored to around 80% of 2019 levels, but noted that higher fuel prices will likely lead to a pre-tax loss as oil holds at the highest levels in seven years. 

"Our September quarter marked an important milestone in our recovery, with our first quarterly profit since the start of the pandemic," said CEO Ed Bastian. "Our revenues reached two-thirds of 2019 levels thanks to the industry-leading operational performance our people delivered through a busy summer, once again showing why they are the best in the business."

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"While demand continues to improve, the recent rise in fuel prices will pressure our ability to remain profitable for the December quarter," he added. "As the recovery progresses, I am confident in our path to sustained profitability as we continue to provide best-in-class service to our customers, strengthen preference for our brand, while creating a simpler, more efficient airline."

Delta Air Lines shares were marked 4.5% lower in early trading following the earnings release to change hands at $41.57 each, extending their six-month decline to around 14%.

American Airlines  (AAL) - Get American Airlines Group, Inc. Report, Delta's larger rival, said yesterday that it sees a narrower-than-expected third quarter loss as bookings improved amid a slowing in Delta-variant infections and the lifting of some international travel bans, including visitors from the European Union. 

American shares fell 2.54% in early trading to $19.78 each.