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Delta Air Lines on Thursday reported record revenue for its second quarter, but profits sank thanks to cheaper airfares, driving the stock down.
The Atlanta-based airline said revenue grew 7% to almost $16.66 billion for the April to June quarter, a record that period. Delta was bolstered by strong travel demand, which the airline expects to continue through the rest of the summer. The Transportation Security Administration broke its record for most travelers screened in a single day, 3,013,413, on Sunday.
But net income took a 29% blow compared to a year earlier, falling to $1.3 billion for the second quarter. Earnings per share came in at $2.36, slightly below the $2.37 per share expected by analysts, according to FactSet.
Delta is forecasting earnings for the July to September quarter to fall between $1.70 and $2 per share, below analysts’ $2.04 consensus. The company expects sales to not grow more than 4%, below analysts’ expectations of 5.6% growth for the period. The airline expects to grow its flying capacity to by 5% to 6% for the July to September quarter, a smaller expansion than the 8% it recorded for last quarter.
Delta also reiterated its forecast that full-year profit will be between $6 and $7 per share.
“As our international network and core hubs approach full restoration and we return to a normal cadence of retiring aircraft, Delta’s capacity growth is decelerating into the second half,” Delta President Glen Hauenstein said in a statement. Hauenstein noted the company expects “sequential improvement in unit revenue trends through the quarter.”
Delta stock fell as much as 9.6% in pre-market trading on Thursday. The stock is currently down just shy of 9%.
The company’s increase in revenue was outweighed by higher costs, which climbed 10% overall. The cost of jet fuel jumped 12%. Labor costs increased by 9% and could grow more expensive thanks to a burgeoning union drive.
Just 20% of Delta’s more than 80,000 workers are unionized, making it the least-organized among the U.S.’s four biggest airlines. Three major unions have been working together since last November to change that and organize more than 50,000 workers. During Delta’s annual meeting of shareholders last month, shareholders voting down a proposal asking the airline to remain neutral on the matter.