Delta Lands a Q3 Earnings Beat

In this segment from the Market Foolery podcast, host Chris Hill and Motley Fool Asset Management's Bill Barker take a bird's-eye view of Delta Air Lines' (DAL 3.05%) latest quarterly report. Shareholders and the company had already taken the impact of the massive storms into account, so investors were happy with the result.

And the fact that the industry is a place where shareholders can finally make a profit is still something that impresses the Fools -- even if they have the same issues with the passenger experience we all do.

A full transcript follows the video.

This video was recorded on Oct. 11, 2017.

Chris Hill: Earnings, third-quarter profit for Delta Airlines coming in higher than expected. Ed Bastian, the CEO, said it was a very good quarter, especially considering the impact of the recent hurricanes. I will note, however, he did stop short of parroting Doug Parker's line -- Doug Parker, the CEO of American Airlines, who recently came out and said, "We're never going to lose money again." So things are amazing at American Airlines. At Delta Airlines, they're merely very good.

Bill Barker: Yeah. And that sums up the whole thing right there. You've covered it.

Hill: Should we move on?

Barker: Yeah. As I said, the other stories are much more -- no. So Delta had a pretty good quarter. Of course, the impact of the hurricanes was already known, so earnings were down, earnings per share down a bit year over year, but less than expected as they operated pretty efficiently other than the hurricane news. At this point it's no longer news, because it's priced in. But it's been a pretty good run for airlines in general. Delta has been not moving as a stock the last couple of years compared to what it did in 2013-2014. But you don't quadruple your price over a two-year period and then just get to keep doing that.

Hill: It would be nice if you did.

Barker: It would be nice. And simply to have maintained the $40 billion-ish market cap that it had, it bought back some shares, and it's worked out. But it's been sort of a flat stock over the last couple of years.

Hill: I don't know about you, but I still find it a little weird and a little difficult to get used to the idea that airlines might actually be stocks worth owning.

Barker: OK. And I think the reason why you think it's weird is because you have been raised on lines such as Buffett's about killing the Wright brothers rather than letting them create airlines, as it was a place for people to lose money as investors for all of the decades that there were that had airline stock investment as a possibility, until about the last five or six years.

Hill: Except for Southwest.

Barker: Except for Southwest.

Hill: For a very long time, that was the one airline worth owning.

Barker: And the reason can be summed up, I think, more or less entirely by, you used to be able to get on an airplane and expect to lay out in the seats. And this is a problem for me, because I have an international flight coming up, and there's just no way that I'm going to be able to stretch out across three seats, or four, or five, as you could back in the day. Just take the middle, I don't know, are there five, do they have that anymore? Five seats in the middle?

Hill: Five seats in the middle? Sure. Absolutely. Over the summer, when we flew over to London and back, we were on one of those planes.

Barker: Who'd you put in that middle fifth seat?

Hill: Oh, I wasn't actually in the middle.

Barker: One of your kids was?

Hill: One of my kids was, yeah. [laughs] It's like, hey.

Barker: Hey, you're a kid. You pay for the seats if you want an aisle seat.

Hill: You're smaller than me, and I know that of the two of us, you're much more likely to fall asleep than I am. I don't have that superpower, to fall asleep on planes. Where are you going, by the way? Where's your international flight?

Barker: I'm going to Dubai. This will be fun. I'll be there for about 48 hours and then come back.

Hill: When we think about quick turnaround trips, Dubai is high on that list.

Barker: [laughs] That's what you get when you spend $650 on a round-trip plane ticket to Dubai. It's not a great seat experience. And, OK, the flight is going to be full. I know that. You know that. You don't need to know anything more about the fact that the flight is going to be full than it's a modern-day flight. Airlines are filling up all the seats, and that's a lousy experience for travelers, especially in economy. The trade-off is, investors are now making money by owning efficiently run companies, whereas before it was a little bit more of a pleasure to get through security and get on a plane and have lots of room to stretch out. The experience is no longer pleasurable, but it makes more business sense.