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Delta 2023 earnings forecast sees ‘robust’ travel demand

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Delta Air Lines says the travel boom is not over.

The airline expects its adjusted earnings to almost double to as much as $6 per share next 12 months, above analysts’ estimates. It forecast a 15% to twenty% jump in revenue in 2023 from this 12 months, which is predicted to usher in roughly $45.5 billion.

Free money flow will likely rise from greater than $2 billion next 12 months to greater than $4 billion in 2024, a pointy turnaround from 2020 when Delta posted a record loss. Delta is planning to pay down more of its debt over the subsequent two years.

Delta Air Lines Airbus A330-300 landing at Athens International Airport AIA ,LGAV / ATH Eleftherios Venizelos, with registration N806NW, a former Northwest Airlines Airplane.

Nicolas Economou | NurPhoto | Getty Images

Delta and other airline executives in recent weeks have been upbeat a couple of recovery in travel demand, despite warnings from other industries about economic weakness ahead.

“We have seen our recession,” CEO Ed Bastian said in an interview. “Consumers are prioritizing their spend, where they’re making decisions, and so they’re prioritizing investing in themselves and experience.”

Delta on Wednesday raised its fourth-quarter earnings forecast to a variety of $1.35 to $1.40 a share, up from its previous outlook of $1 to $1.25 per share. It expects total revenue to are available in 7% to eight% higher than the fourth quarter of 2019, before the Covid pandemic.

Shares of Delta rose almost 2.8% on Wednesday to shut at $34.31, while the broader market fell. Delta’s shares are off 12% this 12 months.

The U.S. airline industry returned to profitability this 12 months because of a pointy rebound in travel demand and consumers’ willingness to pay higher fares, which helped carriers greater than make up for increased costs like fuel.

Airlines have cut some routes and been forced to cut back their planned capability growth, which has kept fares firm. Supply chain and labor constraints have delayed deliveries of recent aircraft, and airlines proceed to struggle with a shortage of trained pilots.

Bastian told CNBC that business travel is about 80% recovered to 2019 levels, with demand from smaller businesses even stronger than before the pandemic.

“It’s never going to return to what it was like but there are going to be latest types of travel which are going to complement that,” he said.

Some carriers have warned about moderating growth or pockets of weakness within the business.

Watch CNBC's full interview with Delta Air Lines CEO Ed Bastian

United Airlines CEO Scott Kirby last week said that business travel demand has “plateaued” but that revenue continues to be rising. Alaska Airlines said in a filing on Tuesday that demand is nice for the fourth quarter, though it flagged a “modest softening in corporate travel bookings.”

And JetBlue Airways, said the “very strong” last-minute demand it was expecting in December “has materialized below expectations.”

But for Delta, bookings remain strong into early 2023, Bastian said.

Delta has been more conservative than a few of its competitors in bringing back capability however the Atlanta-based carrier goals to have its network restored to 2019 levels next summer.

Airfare within the U.S. has eased from peaks hit earlier this 12 months but prices are still well above 2021 levels.

A restoration of capability will likely “take somewhat little bit of pressure off the fare mix,” but strong demand will proceed to spice up revenues, Bastian said.

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