When Delta Air Lines (DAL) reports third-quarter results on Thursday, Wall Street's focus, as it has been for much of this year, will likely be on unit revenue and when exactly the carrier can push the key metric into positive territory.
Meanwhile, as the benefits from cheap oil fade, analysts expect Delta's earnings per share to fall 3% to $1.68, which would be the first year-over-year drop since Q3 2014. Revenue is expected to be down around 5% to $10.6 billion.
The carrier has said it wants to be the first network carrier to return to positive unit revenue growth this year. But management has pushed back the date for when it expects to do that.
Unit revenue measures revenue as it relates to an airline's flight coverage, seats on flights and distance traveled. After cheap oil provided a massive cost windfall for airlines, that measure has fallen as airlines expanded -- too much so, at times -- and cut fares in some markets while the dollar also strengthened.
In September, however, Delta said that passenger unit revenue in September strengthened from the prior two months. That month, Delta's CFO also said that potentially higher fuel costs in the fourth quarter could prompt the industry to pass on more costs to travelers.
Delta has said it expects a Q3 unit-revenue decline of around 7%, with around 1 percentage point coming from an outage in August that resulted in more than 2,000 flight cancellations. Three months ago, Delta projected a 4%-6% drop in unit revenue for the quarter.
Delta's traffic results in July and August was hurt by the outage, weakness in close-in bookings, and overcapacity in the Transatlantic. Airlines have vowed to tighten capacity growth in an attempt to align it with passenger demand.
But on Monday, Delta said it will begin daily nonstop service from Los Angeles International Airport to Ronald Reagan Washington National Airport in April.
IBD'S TAKE: In addition to capacity concerns, analysts say the labor deals airlines have made recently with employees could weigh on profits in the coming year.
Broader concerns about terrorism and the Zika virus have also hurt shares of Delta and industry rivals like American Airlines (AAL) and United Airlines (UAL). Southwest's (LUV) Q3 guidance also got dinged by its own issues with flight cancellations.
But after a tumultuous summer, October has presented its own problems for the industry. Hurricane Matthew has prompted around 4,500 airline flight cancellations, Cowen & Co. said in a research note on Monday, citing data from FlightAware.
However, such storms have actually helped passenger unit revenue but not earnings, Cowen said.
"If the market were to be true to recent trading patterns an improved near-term unit revenue outlook as a result of the storms should be beneficial to stocks," the firm said.
Delta shares closed up 2.1% at 39.77 in the stock market today. American rose 3.1%, United added 2.6%, and Southwest rallied 3.4%, nearing its 200-day average.
United reports quarterly results Oct. 18, American reports Oct. 20 and Southwest reports Oct. 28.
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