Delta, First Profit Turnaround... Asia Reopens Sky Routes

(Photo by Reuters)

[Asia Economy Reporter Yujin Cho] Delta Air Lines has become the first U.S. airline to return to profitability since the COVID-19 pandemic. This achievement is considered significant as it was accomplished amid a slowdown in air travel demand due to the surge of the Delta variant. While passenger demand is recovering as the U.S. and various Asian countries ease travel restrictions, inflation-related operational challenges are expected to pose obstacles to the aviation industry's recovery.

According to the Wall Street Journal (WSJ) and others on the 13th (local time), Delta Air Lines announced that it posted a net profit of $1.2 billion (approximately 1.4 trillion KRW) in the third quarter of this year. This marks the second quarterly profit since the COVID-19 pandemic began in March last year, and Delta is the first major U.S. airline to report net profit ($194 million) excluding federal government aid.

Delta's earnings per share for the third quarter were $0.30, surpassing market expectations of $0.17. Revenue for the same period was $8.3 billion, slightly below the market estimate of $8.45 billion.

After consecutive quarterly losses immediately following the COVID-19 pandemic, Delta Air Lines has recently improved its performance despite a slowdown in air travel demand caused by the spread of the Delta variant.

Ed Bastian, Delta's Chief Executive Officer (CEO), said during a conference call, "Air travel demand is strengthening again, and we expect long-haul international travel demand to recover within a few months."

With the U.S. planning to ease travel restrictions on the U.K. and European countries, there is also anticipation that the relatively slow recovery of international and business passenger demand will accelerate.

Delta Air Lines explained that new bookings from Europe for November and December increased about sixfold immediately after the announcement of the easing of travel restrictions. CEO Bastian said, "We expect business travel demand from major corporate clients, a key revenue source, to recover to 80-100% of 2019 levels by the end of next year."

Airlines in the Asia region are also increasing flights as travel restrictions begin to ease. Malaysia and Vietnam have decided to resume domestic flights after lifting lockdown measures in major cities that lasted several months due to a resurgence of COVID-19.

Singapore, Thailand, and others have decided to allow entry without infection testing for foreigners who have completed vaccination.

The International Air Transport Association (IATA) stated, "While we do not expect significant improvements in the resumption of international flights in the Asia-Pacific region until the latter half of next year, cumulative losses are expected to shrink significantly from $11.2 billion this year to $2.4 billion next year."

However, inflationary pressures such as rising fuel prices remain a challenge to the global aviation industry's recovery. Delta Air Lines expects a decline in profits in the fourth quarter due to rising fuel costs. The price of jet fuel, which was $1.94 per gallon in the third quarter, is expected to rise to $2.25?$2.40 per gallon in the fourth quarter, according to Delta.