Delta Air Lines (NYSE:DAL) has adjusted its third-quarter earnings guidance on Thursday, joining other U.S. carriers like American Airlines (NASDAQ:AAL) Group in responding to escalating fuel costs. The revision led to a 2.8% fall in Delta's stock earlier this week, following a similar move by American Airlines.
The Atlanta-based airline now expects its adjusted earnings per share for the third quarter to range between $1.85 and $2.05, down from the prior forecast of $2.20 to $2.50. This 40-cent reduction in midpoint guidance is less severe than American's 65-cent downgrade, a portion of which was due to a new pilot pay agreement.
Despite the revised outlook, Delta also shared some positive news. The company anticipates third-quarter revenue to be in the "upper half" of its previous projection for 11% to 14% year-over-year growth. It also expects Total Revenue per Available Seat Mile (TRASM) to decline by only 2% to 3%, an improvement from the initially predicted drop of 2% to 4%.
In contrast, American Airlines foresees a steeper TRASM fall of between 5.5% and 6.5%, revised from an initial prediction of a 4.5% to 6.5% decrease. Spirit Airlines (NYSE:SAVE) also recently lowered its revenue guidance, contributing to the sector's difficulties.
However, Delta has maintained its full-year earnings guidance of $6 to $7 per share amidst these adjustments.
Airline stocks have faced challenges over the past few months due to concerns over potential slowdowns and rising fuel prices, overshadowing initial enthusiasm about strong summer travel demand. The U.S. Global Jets exchange-traded fund (JETS), which tracks the performance of airline stocks, has experienced a 19% drop from its July peak and has fallen during nine out of the past ten trading sessions through Wednesday.
Investors had anticipated Delta's guidance revision in light of the industry's ongoing struggle with high fuel costs. Nonetheless, the revised forecast, although lower, offers some respite against the backdrop of the sector's recent downturn.
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