Delta’s profit outlook misses estimates as labor costs climb

Delta forecast Q1 profit short of Wall Street’s estimates, dragging down the carrier’s shares as higher costs deal a blow to its efforts to further capitalize on a rebound in air-travel demand. Adjusted earnings will be 15 to 40 cents a share in the period, the airline said Friday in a statement that also detailed fourth-quarter results. Unit expenses this quarter, excluding fuel, will climb as much as 4% from a year ago, a forecast that Delta said includes “expected labor cost increases” and impacts from network rebuilding. Analysts had predicted an adjusted per-share profit of 54 cents on average, according to estimates compiled by Bloomberg. At least some analyst estimates did not incorporate the elevated costs. The outlook contrasts with Delta’s better-than-expected fourth-quarter results, suggesting a choppy travel recovery amid financial pressures and questions about consumer confidence. Leaders of the largest US airlines have remained bullish in their expectations that passengers will continue to pack planes as air travel returns from an early-pandemic slump. Even as Delta warned of cost pressures Friday, CEO Ed Bastian said “the industry backdrop for air travel remains favorable” in 2023. The carrier’s rising expenses are due in part to a proposed four-year contract with pilots calling for at least 34% in cumulative pay hikes. The union is finalizing language in a preliminary agreement before leadership decides whether to send it to pilots for a vote. In addition to labor, Delta is also grappling with costs related to work to rebuild its pandemic-reduced network ahead of peak summer travel. Costs for each seat flown a mile, a measure of efficiency, will fall 2% to 4% for the full year versus 2022, compared to the airline’s earlier view of a drop of as much as 7%.<br/>