Delta Air Lines forecasts a stronger-than expected profit in the fourth quarter as travel demand soars
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.
China’s economic headwinds will impact the world
In recent times, China’s economic health has become a topic of international concern. Often regarded as the world’s second-largest economy and home to over 1.4 billion people,
China is grappling with a slew of issues: sluggish growth, soaring youth unemployment, and a turbulent property market. The situation escalated further when the chairman of Evergrande, a heavily-indebted real estate giant, came under police scrutiny, leading to a suspension of the company’s shares on the stock market.
The question on many minds is how much these troubles in China matter to the rest of the world. While some argue that fears of a global catastrophe are exaggerated, there will undoubtedly be repercussions felt by multinational corporations, their employees, and even individuals with no direct ties to China.
China plays a pivotal role in the global economy, responsible for more than a third of worldwide economic growth. Hence, any slowdown in China’s economic engine will reverberate beyond its borders. Multinational giants like Apple, Volkswagen, and Burberry rely heavily on China’s vast consumer market, and reduced domestic consumption in China will affect these companies and, subsequently, their global suppliers and workers.
However, the idea that China is the sole driver of global prosperity has its skeptics. While China’s economic growth contributes significantly to global figures, it primarily benefits China itself due to its trade surplus. This surplus means that China exports far more than it imports, making its growth more self-contained.
Nonetheless, a China that spends less on goods and services, or on housing construction, translates to reduced demand for raw materials and commodities. This hits countries like Australia, Brazil, and African nations, which heavily depend on exporting such resources. Moreover, weak demand in China results in stable prices, which can be welcomed by Western consumers grappling with inflation.
Over the past decade, China has poured over a trillion dollars into expansive infrastructure initiatives like the Belt and Road Initiative, benefiting more than 150 countries. However, if China’s economic problems persist, its capacity to finance such projects abroad may diminish. This could have lasting consequences, especially for developing nations reliant on Chinese investments and technology for their infrastructure development.
Lawsuit – Black Tesla workers endure harassment
A recent lawsuit filed by the Equal Employment Opportunity Commission (EEOC) has shed light on a disturbing workplace environment at Tesla’s Fremont factory.
Black Tesla workers have allegedly faced relentless harassment, including the display of swastikas and nooses, according to the lawsuit.
The lawsuit, which was filed on behalf of several affected employees, details a pattern of racial discrimination and harassment that has persisted for an extended period. Incidents reported in the lawsuit include the drawing of swastikas on workstations and restroom walls, as well as nooses left hanging in areas where black employees would see them.
The complaint further alleges that management at the Tesla factory failed to take appropriate action to address the issues, even after multiple complaints were made.
This lack of response has only exacerbated the hostile work environment, leaving the affected workers feeling vulnerable and unsupported.
Tesla, a company known for its innovative approach to electric vehicles and renewable energy, now faces a serious legal battle that threatens to tarnish its reputation.
The EEOC lawsuit seeks compensation for the victims and aims to bring about significant changes in Tesla’s workplace culture to prevent such incidents from happening in the future.
GameStop CEO urges extreme frugality for company’s survival
In a candid address to GameStop’s employees, CEO Ryan Cohen emphasized the critical need for “extreme frugality” as the company navigates a challenging period in its history.
Cohen’s message came as GameStop continues its transformation from a traditional brick-and-mortar video game retailer into a digital-first gaming platform.
Cohen acknowledged the difficulties GameStop has faced in recent years, including declining sales and increased competition from online retailers. To secure the company’s future, he stressed the importance of prudent spending and resource allocation.
“We must be extremely frugal in our expenditures,” Cohen told employees. “Every dollar counts, and we need to make sure our investments are strategic and yield meaningful returns.”
The CEO’s call for frugality is part of GameStop’s broader effort to adapt to the changing landscape of the gaming industry. The company has been expanding its e-commerce capabilities and exploring opportunities in the rapidly growing world of esports and NFTs (non-fungible tokens).
Cohen also highlighted the significance of innovation and customer-centricity. He urged employees to think creatively and prioritize customer satisfaction as GameStop evolves to meet the evolving needs of gamers.
While the path ahead remains challenging, GameStop’s CEO expressed confidence in the company’s ability to succeed with the right strategy and a dedication to financial discipline.
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