ATLANTA, October 12, 2023 – Delta Air Lines (NYSE: DAL) today reported financial results for the September quarter and provided its outlook for the December quarter 2023. Highlights of the September quarter, including both GAAP and adjusted metrics, are on page five and incorporated here.
“Thanks to the outstanding work of our entire team, Delta delivered record September quarter revenue and a double-digit operating margin. Our operational reliability continues to strengthen, thanks to our people, and I’m pleased to recognize their outstanding efforts with over $1 billion accrued year-to-date towards profit sharing,” said Ed Bastian, Delta's chief executive officer.
“Delta continues to set itself apart as a trusted consumer brand delivering welcoming, caring and elevated service by the best people in the industry. Our differentiated position supports our expectations for full year revenue growth of 20 percent over 2022, and pre-tax earnings of over $5 billion, a near doubling over prior year earnings.”
September Quarter 2023 GAAP Financial Results
- Operating revenue of $15.5 billion
- Operating income of $2.0 billion with an operating margin of 12.8 percent
- Pre-tax income of $1.5 billion with a pre-tax margin of 9.8 percent
- Earnings per share of $1.72
- Operating cash flow of $1.1 billion
- Payments on debt and finance lease obligations of $724 million
- Total debt and finance lease obligations of $19.5 billion at quarter end
September Quarter 2023 Adjusted Financial Results - Operating revenue of $14.6 billion, 13 percent higher than the September quarter 2022
- Operating income of $2.0 billion with an operating margin of 13.5 percent
- Pre-tax income of $1.7 billion with a pre-tax margin of 11.8 percent
- Earnings per share of $2.03
- Operating cash flow of $1.1 billion
- Adjusted net debt of $20.2 billion at quarter end
1
December Quarter and Full Year Outlook1
4Q23 Forecast FY 2023 Forecast
Total Revenue YoY
Up 9% – 12% Up ~20%
Operating Margin
9% – 11% ~11.5%
Earnings Per Share
$1.05 – $1.30 $6.00 – $6.25
1 Non-GAAP measures; Refer to Non-GAAP reconciliations for comparison figures
Additional metrics for financial modeling can be found in the Supplemental Information section under Quarterly
Results on ir.delta.com.
Revenue Environment and Outlook
“We generated record September quarter revenue, with total revenues 13 percent higher than the September quarter of 2022. With this performance, we expect to deliver a record September quarter unit revenue premium to the industry, reflecting the strength of Delta’s diverse revenue streams and continued brand momentum,” said Glen Hauenstein, Delta’s president.
“Robust demand for travel on Delta is continuing into the December quarter where we expect total revenue growth of 9 percent to 12 percent compared to the December quarter 2022 with total unit revenue (TRASM) expected to decline 2.5 percent to 4.5 percent. Within this outlook, Domestic and Transatlantic trends are consistent with the September quarter on a year-over-year basis, while unit revenue trends in the Pacific and Latin America are expected to modestly decelerate given capacity growth related to China re-opening and investment in our LATAM JV.”
- Demand for travel on Delta remains strong: Unit revenues in the September quarter were at the high- end of guidance, with adjusted total unit revenue (TRASM) down 2.5 percent year-over-year, including approximately one point of pressure from Cargo and MRO. Passenger unit revenue (PRASM) was down 1.5 percent year-over-year.
- Domestic demand environment steady: Domestic passenger revenue increased 6 percent versus 2022 on 11 percent more capacity, with domestic unit revenue down 4 percent year-over-year. Coastal hub load factors expanded year-over-year, driven by growing demand in Boston and New York. Business travel continues to improve as corporates announce return to office initiatives. Our recent corporate survey indicates that a significant majority of companies are expecting their travel volumes to increase or stay the same in the December quarter and into 2024.
- International strength extending through fall: International passenger revenue was 35 percent higher versus 2022 in the September quarter with record margins across all regions. Transatlantic revenue grew 34 percent with record PRASM on its largest schedule in Delta's history. Latin America revenue grew 20 percent versus 2022 driven by strength in South America as the LATAM JV delivers increased connectivity and synergies. For the year, we remain confident in finishing strong with record profitability across all three international entities.
- Growth in diversified revenue streams continues: Premium and other diversified revenue streams, including Loyalty, Cargo and MRO comprised 55 percent of total revenues year-to-date. Premium revenue growth of 17 percent year-over-year outpaced main cabin by 5 points, with total Loyalty revenue up 17 percent on strong co-brand acquisitions and spend growth. American Express remuneration for the September quarter was $1.7 billion, approximately 20 percent higher than September quarter 2022.
Cost Performance and Outlook
“For the December quarter, we expect non-fuel unit costs to be flat to 2% higher year-over-year as we realize the benefits of scale and efficiency while making investments in our people and operational reliability,” said Dan Janki, Delta’s chief financial officer. “Delivering operational excellence while driving efficiency remains a top priority.”
2
September Quarter 2023 Cost Performance
- Operating expense of $13.5 billion and adjusted operating expense of $12.6 billion
- Adjusted non-fuel costs of $9.2 billion
- Non-fuel CASM was 1.3 percent higher year-over-year
- Adjusted fuel expense of $3.0 billion was down 10 percent year-over-year
- Adjusted fuel price of $2.78 per gallon declined 21 percent year-over-year and includes a refinery benefit of 11¢ per gallon
- Fuel efficiency, defined as gallons per 1,000 ASMs, was 14.5, a 1.7 percent improvement year-over-year
Balance Sheet, Cash and Liquidity
“Our financial foundation is continuing to strengthen as we've reduced our leverage to 3x in the September quarter from 5x at the end of last year.” Janki said. “We have repaid $3.7 billion of debt year-to-date and we expect to repay over $4 billion for the year. In recognition of our improving balance sheet, we received a rating upgrade from S&P in August to BB+ with a positive outlook.” - Adjusted net debt of $20.2 billion at September quarter end, a reduction of $2.1 billion from the end of 2022
- Payments on debt and finance lease obligations of $724 million in the September quarter. This included $424 million of maturities and the early repayment of $300 million of debt instruments with an average interest rate of 8 percent
- Weighted average interest rate of 4.5 percent with 89 percent fixed rate debt and 11 percent variable rate debt
- Adjusted operating cash flow of $1.1 billion, and with gross capital expenditures of $1.4 billion, free cash flow was negative $250 million
$8.7 billion - Liquidity* of $7.8 billion at quarter-end, including $2.8 billion in undrawn revolver capacity *Includes cash and cash equivalents, short-term investments and undrawn revolving credit facilities
• Air Traffic Liability ended the quarter at
quarter, consistent with pre-pandemic seasonal trends
, down mid-teens sequentially from the end of June
