Delta Air Lines now expects third quarter (Q3) total revenue to be in the upper half of its prior guidance range, which was up 11%-14%. Delta lowered Q3 EPS guidance to a range of $1.85 to $2.05 compared to the prior outlook for $2.20 to $2.50.
Delta now expects total revenue per available seat mile to be down 2% to 3% in the quarter, with strength in Transatlantic routes offsetting some pressure from its MRO and cargo units.
Fuel costs are rising with Delta predicting an average fuel price of $2.75 to $2.90 per gallon in Q3 up from its previous forecast for $2.50 to $2.70. Non-fuel unit costs are expected to increase 1% to 2% due to higher-than-expected maintenance costs.
Speaking at an investor conference, Delta CFO Dan Janki, explained the rise in MRO costs that has pushed up non-fuel costs: “We now expect maintenance expense to be flat in the second half of the year and third quarter in line with the first half,” he said. “[That is] really driven by three things: investment in fleet health; expanded work scope related to the PW2000 engine, which is a workhorse for our 757 fleet; and additional just challenges in the supply chain as it relates to turnaround time, pace of productivity on that front.”
Although Delta followed its peers warning of the impact of fuel costs, the airline is somewhat out of sync with other carriers since it does not see a significant drop in domestic traffic. Delta president Glen Hauenstein said that he had been surprised comments from other airlines on that topic, saying that Delta sees “really strong particularly business and high-yield demand through the fall” and adds that forward bookings for the festive season later in the year are “shaping nicely”.