Delta Air Lines’ summer results in line with expectations |

UPDATE - Despite warning shots from some US airlines about lower results in Q3, Delta Air Lines seems to have been largely immune to any slump in air travel. The carrier reported another strong quarter, with revenues up in line with previous expectations. Domestic travel is steady, but the transatlantic and Latin America have produced a very strong summer. Delta reported a $1.108 billion net profit for the September quarter compared to $695 million last year. Total (GAAP) revenues improved by thirteen percent to $15.488 billion, up from $13.975 billion. This was in line with the Q3 guidance of plus eleven to fourteen percent provided in July. Passenger revenues were $13.119 billion, up from $11.464 billion in Q3 2022. While the main cabin revenues grew by $727 million to $6.620 billion, premium products saw a comparatively bigger increase of $759 million to $5.113 billion. By region, transatlantic revenues were up 34 percent year on year to $3.110 billion, with Latin America up by twenty percent to $788 million. Except for China, the Pacific is fully restored to pre-pandemic levels and has seen revenues jump by 65 percent to $559 million. President Glenn Hauenstein said that Seoul Icheon is exceeding expectations and is probably the best hub to use in Southeast Asia. Delta will add capacity to South Korea next year. Japan is also performing very well, so the Pacific is finally producing the margins that Delta has been counting on for some years. US domestic revenues were up only six percent to $8.662 billion on an eleven percent higher capacity. Unit revenues even dropped by four percent, but corporate travel continues to improve and is expected to recover even further in the December and January quarters. Delta saw good results in New York and Boston, both regions where JetBlue and American have strong positions. However, Delta admitted that corporate has probably been hit harder than others by the strikes in the movie and automotive industry in the Los Angeles and Detroit regions. Cargo revenues were down to $154 million from $260 million last year, with other revenues about the same at $2.215 billion. Expenses up by one billion Operating expenses were almost one billion higher year on year in Q3 to $13.504 billion. Salary costs increased by $710 million to $3.760 billion, but fuel costs were $382 million lower to $2.936 billion. The result is an operating profit of $1.984 billion versus $1.456 billion last year, with a pre-tax income margin of 9.8 percent and earnings per share of $1.72. The operating cash flow was $1.1 billion. For January-September, Delta reports a net profit of $2.572 billion versus $489 million in 2022. Total revenues increased by eighteen percent to $43.825 billion from $37.147 billion. Expenses were up by thirteen percent to $39.626 billion from $34.956 billion. The operating profit was $4.199 billion versus $2.191 billion. Delta is still very happy with its Boeing 757s and plans to operate them for some years to come, especially as new aircraft deliveries are late. (Delta Air Lines) Delta ended September with $20.2 billion in net debt, having repaid $3.7 billion this year. Liquidity including cash and cash equivalents and $2.8 billion in an indrawn revolving facility stood at $7.8 billion. Delta expects to pay out $1.0 billion in profit-sharing to its employees in February. December quarter demand remains robust As demand for the December quarter remains robust, Delta expects to grow total revenues by nine to twelve percent to between $13.4 and $13.8 billion, but total revenues per available seat mile (TRASM) will be 2.5 to 4.5 percent lower. The operating margin is guided at between nine and eleven percent. Capacity is expected to grow by fourteen to fifteen percent year on year. Fuel is guided at between $2.90 and $3.20 per gallon. The guidance includes the preliminary effects of the suspension of lights to Israel, which were paused until at least the end of this week following the hostilities that started on October 6. Full-year revenues are expected to grow by twenty percent, which is slightly above the July guidance of seventeen to twenty percent. The operating margin will be slightly lower, though, to 11.5 percent instead of twelve. EPS is guided at $6.00 to $6.25. The airline has grown its fleet by ten aircraft in Q3, adding more Airbus A220-300s, A321neo’s, and A330-900s. This year, 28 new aircraft have been delivered. It placed an order for twelve more A220-300s in July. The new Delta SyncBack inflight entertainment system was introduced on selected A321s this quarter and will be rolled out on other aircraft types in the coming months. One of them is the Boeing 757, which Delta intends to operate for the next few years. Currently, 112 are active, with another fifteen 757-200s in storage. More have come out of storage and are undergoing maintenance. With good engine reliability, they are attractive to operate, especially as new aircraft arrive late. The airline says it has the flexibility to decide in the next three to five years what to do with the Boeings. "It is a great workhorse with good returns." President Glenn Hauenstein noted that the very last 757 was delivered to Delta, so the fleet isn't that old but many aircraft will come to the end of their life by the end of this decade. Waiting for GTF news Delta expects only a modest impact on the operations of Pratt & Whitney Geared Turbofan-powered Airbus A321neo's due to the powder metal contamination issue. The airline has engines that are younger than the ones affected by the issue and that need inspections and repairs. At the moment, the airline expects some engines to need to be taken off wing in HY2 of 2024. P&W is still evaluating the impact of the issue on the PW1500G-version on the Airbus A220, which Delta is expecting later this month. Delta Technical Operations has the capacity for 150-160 engines to be overhauled in its shops and plans to add more. Coming Winter, Delta plans to add 35.000 seats on the network to Latin America and the Caribbean, plus a return of the non-stop service to Curacao in December after a thirteen-year absence. The airline already announced a further extension of the transatlantic network for next summer, when it will add Munich and Naples to the schedule from JFK and Dublin from Minneapolis. Aeromexico and Delta will start their codeshare on seventeen new routes in January, which includes flights from seven airports in Mexico to nine destinations.

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