Delta shares fell more than 5% Thursday after the airline forecast lower-than-expected quarterly profit — despite a surge in travel this summer.

The Atlanta-based carrier Delta blamed discounting pressure in the low end of the market for dampening its pricing power as it predicted an adjusted profit between $1.70 and $2.00 per share in the third quarter through September, compared with analysts’ expectations of $2.05, according to LSEG data.

The lowered profit expectations come as airlines are enjoying a summer travel boom, with more than 3 million people passing through US airport security checkpoints in a single day on July 7.

However, that boom has failed to lift earnings at most of the US carriers as excess industry capacity has undermined pricing power. Major airlines have scheduled about 6% more seats in the domestic market this month than a year earlier, data from consultancy Cirium shows.

Delta’s revenue from main cabins, which generate about 49% of its passenger revenue, was flat in the June quarter. In contrast, revenue from premium cabins was up 10% year-on-year.

“This (Delta’s earnings) print will likely raise concerns about industry health and lead to more pressure on low-cost carriers and ultra-low-cost carriers to cut capacity,” TD Cowen analysts said.

Delta also reported a hit to transatlantic bookings as travelers avoid flying to Paris due to the Olympic Games this summer.

Although the Atlanta-based company delivered its second-highest quarterly performance in history – sitting just below last year, which was the first summer travel season since the pandemic – the company is facing steep competition from discount carriers.

The average plane ticket price at the busiest US airports is between $260 and $465, according to Bankrate. Meanwhile, discount carrier Spirit Airlines sells domestic tickets at an average price of $98, according to Statista. 

CEO Ed Bastian said during a CNBC interview on Thursday that the impact on Delta from super-discounted carriers is “fairly limited” since Delta has more expansive offerings for first-class, business and economy travelers than discount airlines.

Delta remains the most profitable carrier in the US, with United Airlines coming in second. 

The two carriers have been racing to draw in premium customers to boost profits. Delta’s first-class ticket sales jumped 10% in the second quarter.

Delta earned $15.4 billion in adjusted revenue in the second quarter, up 5.4% from last year. But net income dropped and operating expenses spiked 10% from last year as ticket fare continues to drop.

Bastian said customers are seeing results from very steep demand and lower average airfare, but he predicts business will balance out in the fall along with demand.

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