Delta Air Lines forecasts a stronger-than expected profit in the fourth quarter as travel demand soars

Delta Air Lines Inc has forecast a stronger-than-expected profit in the fourth quarter. The carrier expects travel demand to remain robust, despite growing risks of an economic recession.

Shares of Delta Air Lines soared more than 5% Thursday morning. The carrier forecast another stronger-than-expected profit in the fourth quarter after a summer travel surge.

The airline said it expects travel demand to stay strong despite growing risks of an economic recession and sharply higher ticket prices.

In an interview with Reuters, CEO Ed Bastian said consumers’ finances were still “quite healthy,” adding: “This demand surge is going … to continue for some time.”

Delta said its third-quarter earnings were impacted by Hurricane Ian, which led to mass flight cancellations last month, but strong travel demand generated the highest quarterly revenue in the company’s history.

Loosened health restrictions as well as a strong U.S. dollar have encouraged more Americans to travel overseas. Office re-openings are also boosting corporate travel demand.

Delta said corporate bookings, the industry’s cash cow, have increased. Its international passenger revenue has recovered to 97% of 2019 levels.

But growing risks of an economic recession amid high inflation have sparked worries about travel spending. This has hammered airline shares. It also took the focus away from what is shaping up to be the industry’s best earnings performance in three years.

The Federal Reserve is aggressively raising interest rates to tame inflation. They’re lowering demand and slowing economic growth, putting the industry’s pricing power under threat.

Thursday’s consumer price index report from the Labor Department showed that airline fares rose by nearly 43% in September, the fastest rate on record.

Higher ticket prices led to a 23% jump in Delta’s total revenue in the latest quarter.

Report by Chris Dignam.