Rise in fuel prices threaten Delta Air Lines profitability, CEO says

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Affected by the recent surge in aviation fuel prices, one of the major carriers of the United States, Delta Air Lines, may face a significant pre-tax loss for Q4 of 2021.

Even though the Atlanta-headquartered airline forecasts a strong passenger demand during the holiday period in the upcoming November 2021, as the US will reopen its borders for fully vaccinated travelers from 33 countries, a sharp soar in fuel prices has already negatively affected the company’s share price. As of October 13, 2021, Delta Air Lines shares dropped by around 4,93% and currently stand at $41,83, the Nasdaq.com data indicates.

According to Delta Air Lines’s financial performance report, which was released on October 13, 2021, the carrier had recorded a 5% increase in fuel expenses in Q3 compared to Q2 2021, making fuel costs account for almost 20% of all airline’s operating expenses in Q3 2021. 

“Our September quarter marked an important milestone in our recovery, with our first quarterly profit since the start of the pandemic,” Delta’s chief executive officer Ed Bastian was quoted in the airline’s statement.

“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.” 

Delta Air Lines reported a strong progression in its recovery, at $8.3 billion in operating revenue in Q3 2021, 66% when compared to the same period in 2019. However, the CEO of Delta Air Lines warned that the present sudden rise in fuel prices may result in a pre-tax loss for the upcoming quarter.

“While demand continues to improve, the recent rise in fuel prices will pressure our ability to remain profitable for the December quarter. 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,” Bastian said.

Financial figures of Q3 2021 indicated that by the end of the quarter, Delta Air Lines had around $15.8 billion in liquidity, including cash and cash equivalents, short-term investments, and undrawn revolving credit facilities.


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