DALLAS -- Delta Air Lines set records for passengers and revenue over the summer and benefitted from cheaper jet fuel, boosting its third-quarter profit 13 per cent to US$1.5 billion.

However, Delta offered a cautious fourth-quarter forecast that fell short of Wall Street expectations, and the airline's shares dropped Thursday.

CEO Ed Bastian said travel demand remains strong.

"It was a good summer at Delta, the busiest summer in our history," he said in an interview. "The consumer outlook is strong. Looking into the holiday period, the bookings look good."

Delta, however, was caught short on pilots this summer, leading to a record amount of overtime flying, according to the pilots' union. The airline is adding about 6,000 people a year to handle growing passenger traffic and replace up to 4,000 employees who leave or retire.

The hiring spree is adding to investors' fears about rising costs at the carrier. Excluding fuel, spending per seat rose 2.4 per cent in the third quarter, but Delta sees that jumping to between 4 per cent and 5 per cent in the fourth quarter, resulting in earnings per share of US$1.20 to US$1.50. Analysts were expecting US$1.51 per share.

In afternoon trading, shares of Delta Air Lines Inc. were down US$1.56, or 2.9 per cent, to US$52.36 after falling 5.3 per cent in earlier trading.

Atlanta-based Delta has been the most profitable U.S. airline in recent years, and it regularly beats its closest rivals for fewer flight delays and cancellations. This year it has benefitted from the grounding of the Boeing 737 Max -- Delta doesn't own any, but American, United and Southwest do, and they have been forced to cut thousands of flights from their schedules.

Delta might also be gaining at the expense of American Airlines in particular, which suffered through a difficult summer marked by delays and cancellations, many of which American blamed on labour strife with its mechanics.

American entered the year as the world's biggest airline, but Delta surpassed it by revenue in the second quarter, and analysts expect Delta will repeat that feat in the third quarter.

Bastian said Delta's success is due more to its own brand and operations, "not the weakness of any of our competitors."

For the quarter ended Sept. 30, Delta earned about US$173 million more than in the same period last year. Excluding what it considers non-repeating gains and losses, Delta earned US$2.32 per share, 5 cents better than the average forecast of analysts surveyed by Zacks Investment Research.

Revenue rose 5 per cent to US$12.56 billion, slightly less than analysts expected.

Spending on wages and benefits rose 5 per cent, or US$131 million, but that was more than offset by a drop in fuel spending of 10 per cent, or US$259 million, compared with a year earlier.

Delta did best at home. U.S. revenue rose 7.8 per cent as the carrier added flights and appeared to charge higher prices -- about 3 per cent more for every seat on a per mile basis. The carrier showed rising revenue on flights to Europe and South America, but its Asia business declined.

Although its third-quarter report was solid, Delta faces questions heading into the end of the year:

-- Rising costs. Bastian said Delta is adding employees to keep market-share gains it achieved over the summer, when it had to spend heavily on overtime. Also, this month it gave 4% raises to ground workers and flight attendants. Those employees are not represented by unions, and Delta has fought hard to keep unions out.

-- A big investment. Delta agreed last month to pay US$1.9 billion for a 20 per cent stake in Latam Airlines Group in South America, where Delta is weak. Bastian said the 80 per cent premium Delta paid was a "pretty reasonable price to pay for a great long-term stake in a growing geography." He said Delta, which is using cash and borrowing, can handle the additional debt without losing its investment-grade credit rating or cutting the dividend.

-- Return of the Max. Analysts believe that when the Boeing Max does return, probably early next year, it will flood the market with new planes and cause airlines to slash prices to fill seats. That could hurt pricing power across the board, even among carriers like Delta that don't operate the Max.

Bastian, however, believes such predictions are overblown. He said that when airlines finally get their Max planes back, they will get rid of older planes that were scheduled for retirement but kept flying to fill the gap left by the Boeing plane.