Higher costs push airline profits down halfway through 2024

The 2024 Summer travel season has been a boom for the industry. Millions upon millions of travelers are leaving the nest and hitting airports to get away. But something is also happening that is having a negative impact on those airlines. Higher costs and lower fares are driving profits down for airlines, signaling issues as the season progresses.

On Thursday, Delta Air Lines revealed that the company saw a 29 percent profit drop during the second quarter of 2024. That drop was attributed to higher costs and discounted base-level fares. The airline even went as far as to project that its third quarter profits will be lower than expected. Delta reported earning $1.31 billion from April through June compared to the $1.83 billion in 2023. Revenue rose seven percent to $16.66 billion, which is a company record for the second quarter.

“Demand has been really strong,” Delta CEO Ed Bastian said in an interview as reported by ABC News. “International, business, our premium sector all outperformed.”

As those big numbers came in, expenses also rose ten percent. Labor, jet fuel, airport fees, maintenance, and more all increased in the last year. Spending on labor increased nine percent compared to 2023, which was when airlines started recovering from the COVID-19 global pandemic. This comes after Delta laid off nonunion office employees in 2023.

As these numbers come in, the explanation points to a potential growing divide between societal groups.

“Our more affluent customers are contributing meaningfully to our growth, and that’s why we continue to bring more and more product to them,” Bastion said.

As airlines increase fees for checked bags, premium seating and test charging for overhead bin space, middle to low-class passengers will be hit hardest. Again, this comes at a time when demand is at a record high, but it appears that airlines will attempt to curb capacity in future months to recover. Driving down the availability of seats means that prices for those tickets will increase, positively impacting the airlines’ bottom line.

The news on Thursday had a negative impact on these airlines' stock prices. Delta shares dropped by six percent, while JetBlue, American, United, and Southwest fell between three and six percent.