What Delta Earnings, CPI Inflation Data Reveal About The Airline Industry

The latest Consumer Price Index data shows that gasoline prices fell nearly 5% in September, but fuel costs are still up more than all other categories since last year.

Despite airlines continuing to offset rising fuel costs with higher fares, demand isn't slowing down. Here's what you need to know. 

What To Know: The Labor Department on Thursday reported an 8.2% year-over-year CPI increase last month. The September CPI reading came in above average economist estimates of 8.1% and sent stocks tumbling in premarket trading.

Related Link: September Inflation Runs Hot At 8.2%, Sending Stocks Spiraling Lower: What You Need To Know

Despite the downward pressure on broader markets, Delta Air Lines Inc DAL shares popped 5% Thursday morning after the company said travel demand continues to improve even though fares are up significantly.

"The travel recovery continues as consumer spend shifts to experiences and demand improves in corporate and international. In this environment, we expect December quarter revenue growth to accelerate versus 2019," said Delta CEO Ed Bastian.

Domestic passenger revenue was up 2% compared to 2019, while international passenger revenue is 97% recovered from 2019 levels. Corporate sales also increased after Labor Day and are at the strongest recovery rates since the start of the pandemic, Delta said.

Fuel expenses totaled $3.3 billion in the quarter, up 45% compared to 2019. Despite rising costs, Delta said it expects fourth-quarter revenue to be up 5% to 9% compared to the fourth quarter of 2019 on strong demand trends. 

Interestingly enough, of the 43% of U.S. adults planning to travel this holiday season, 79% are changing their plans due to inflation, per a Bankrate survey from last week. The survey indicates that lower income households are being impacted at a higher rate.

This data aligns with comments from Luke Lloyd, investment strategist & wealth advisor at Strategic Wealth Partners, following the CPI print. 

Related Link: 4 Experts On What The 8.2% CPI Print Means For The Fed & The Markets: Could 'Supersize' Rate Hike Spark 'Rude Awakening'?

"We saw the biggest wealth divide in history through the massive stimulus & liquidity that caused asset prices to skyrocket. Now, we are seeing another huge wealth divide through inflation with middle-income & lower-income households being impacted the most," Lloyd said.

In Delta's third-quarter report, the company did note that it is seeing "premium product outperformance."

"Premium revenue was up 8 percent versus 2019, 10 points higher than the main cabin revenue growth," Delta said.

More Airline Earnings Ahead: Investors will get more clues about the standing of the airline industry when other big airlines report earnings, beginning next week.

United Airlines Holdings Inc UAL is set to report its third-quarter financial results after the close on Oct. 18. American Airlines Group Inc AAL is scheduled to report its quarterly results before the market opens on Oct. 20. 

DAL Price Action: Delta has a 52-week high of $46.27 and a 52-week low of $27.20.

The airline stock was up 4.86% at $30.64 Thursday afternoon, according to Benzinga Pro.

Photo: courtesy of Delta Air Lines.