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Delta Air Lines Reports Strong 2023, Boosted by Premium Cabins

Delta Air Lines reported strong financial results for the December quarter and full year 2023, with significant contributions from the airline’s premium cabins and loyalty program earnings.

“2023 was a great year for Delta with industry-leading operational and financial performance.  Our people and their commitment to deliver unmatched service excellence for our customers is at the foundation of Delta’s success.  We are thrilled to recognize their outstanding work with $1.4 billion in profit-sharing payments next month,” said Ed Bastian, Delta’s chief executive officer.  “In 2024, demand for air travel remains strong, and our customer base is in a healthy financial position with travel a top priority.  We expect to grow full-year earnings to $6 to $7 per share and generate free cash flow of $3 to $4 billion, further strengthening our financial foundation.”

DECEMBER QUARTER 2023 GAAP FINANCIAL RESULTS

  • Operating revenue of $14.2 billion
  • Operating income of $1.3 billion with an operating margin of 9.3 percent
  • Pre-tax income of $2.3 billion with a pre-tax margin of 16.0 percent
  • Earnings per share of $3.16
  • Operating cash flow of $545 million
  • Payments on debt and finance lease obligations of $361 million

DECEMBER QUARTER 2023 ADJUSTED FINANCIAL RESULTS

  • Operating revenue of $13.7 billion, 11 percent higher than the December quarter 2022
  • Operating income of $1.3 billion with an operating margin of 9.7 percent
  • Pre-tax income of $1.1 billion with a pre-tax margin of 7.8 percent
  • Earnings per share of $1.28
  • Operating cash flow of $499 million

FULL-YEAR 2023 GAAP FINANCIAL RESULTS

  • Operating revenue of $58.0 billion
  • Operating income of $5.5 billion with an operating margin of 9.5 percent
  • Pre-tax income of $5.6 billion with a pre-tax margin of 9.7 percent
  • Earnings per share of $7.17
  • Operating cash flow of $6.5 billion
  • Payments on debt and finance lease obligations of $4.1 billion
  • Total debt and finance lease obligations of $20.1 billion at year end

FULL-YEAR 2023 ADJUSTED FINANCIAL RESULTS

  • Operating revenue of $54.7 billion, 20 percent higher than the full year 2022
  • Operating income of $6.3 billion with an operating margin of 11.6 percent
  • Pre-tax income of $5.2 billion with a pre-tax margin of 9.5 percent
  • Earnings per share of $6.25
  • Operating cash flow of $7.2 billion
  • Free cash flow of $2.0 billion
  • Adjusted debt to EBITDAR of 3.0x, down from 5.0x at the end of 2022
  • Return on invested capital of 13.4 percent, up 5 points over 2022

Fleet Update

Delta Air Lines A350
Delta Air Lines A350 from below. Image: Delta Air Lines

Delta has agreed to purchase 20 A350-1000s from Airbus with options for 20 additional widebody aircraft. The deliveries are set to commence in 2026. These aircraft will bring improved fuel efficiency, higher gauge, more premium seating, and greater cargo capabilities to Delta’s international widebody fleet. Additionally, Delta has entered a service agreement with Rolls Royce to maintain its Trent XWB-97 engines. The aircraft order aligns with Delta’s previously announced capital expenditure and capacity targets.

Delta Diversifying Revenue with Premium and Loyalty

Delta’s Premium revenue increased by 15% compared to the previous quarter, showcasing strong performance in paid load factors and outperforming Main Cabin. Loyalty revenue also saw growth of 11%, mainly attributed to the rise in co-brand spend. American Express remuneration for the quarter reached $1.7 billion, marking an 11% increase from the previous year. The full-year remuneration amounted to $6.8 billion, showing a notable growth of 22% year-over-year. Diversified revenue, including Loyalty, Premium, Cargo, and MRO, accounted for 55% of the total revenues for the entire year.

Revenue Environment and Outlook

In 2023, Delta achieved a record $54.7 billion in revenue, a 20% increase from the previous year. Premium and non-ticket revenue accounted for 55% of the total, contributing to Delta’s favorable financial performance. The company’s president, Glen Hauenstein, highlighted strong demand for international travel and positive trends in the domestic market. Despite an expected 3-6% increase in adjusted revenue for the March quarter, unit revenues are projected to be flat to down 3% compared to 2023. However, this outlook suggests a two-point sequential improvement in unit revenues year-over-year, although the March quarter faces challenges related to higher international mix, travel credit normalization, and competition from the previous year.

Strong International Demand

International passenger revenue experienced a 25% increase compared to the December quarter of 2022, driven by strong double-digit revenue and capacity growth in the Transatlantic, Pacific, and Latin regions. Notably, the Transatlantic sector led the way with a 9% improvement in passenger unit revenues compared to the same period in 2022. The full-year results delivered exceptional margins across all three international regions.

Delta Air Lines Cost Performance and Outlook

“We closed the year strong, with full-year operating margin expanding by four points to 11.6 percent,” said Dan Janki, Delta’s chief financial officer. In 2024, the company aims to optimize its operations and expects to generate efficiencies to support investments in its workforce, operations, and customers. Delta also anticipates achieving earnings and cash flow growth for the full year, with non-fuel unit costs increasing by low-single digits compared to 2023.

Delta Air Lines December Quarter and Full Year 2023 Results

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