2024 07 11 152658 scaled
Delta Air Lines reported its second quarter 2024 results today, highlighted by operating revenue growth of 7% year-over-year to $16.658 billion, beating the consensus estimate of $15.452 billion. But while revenues solidly beat estimates, earnings did not. Delta’s net earnings were down 29% in the quarter year over year, with lower base fares and higher costs impacting financial performance.
Revenue per available seat mile was down 1% year over year, as was the load factor, down from 88% last year to 87% this year.
Key statistics from the quarter on a GAAP basis include:
- • Operating revenue of $16.7 billion
- • Operating income of $2.3 billion with an operating margin of 13.6 percent
- • Pre-tax income of $1.8 billion with a pre-tax margin of 10.6 percent
- • Earnings per share of $2.01
- • Operating cash flow of $2.5 billion
- • Payments on debt and finance lease obligations of $1.4 billion
- • Revenue per available seat mile is down 1% year-over-year
- • Load factor fell from 88% in the same quarter YOY to 87% in 2024
- • Total debt and finance lease obligations of $18.0 billion at quarter-end
Glen Hauenstein, Delta’s President, stated, “Diverse revenue streams, including premium and loyalty, contributed higher growth and margins, underpinning Delta’s industry-leading financial performance and increasing our financial durability. We expect a capacity growth of 5 to 6 percent in September and revenue growth of 2 to 4 percent, with sequential improvement in unit revenue trends throughout the quarter.”
Dan Janki, Delta’s CEO, stated, “Growth continues to normalize, and our teams are consistently running a great operation, enabling us to deliver efficiency. In the September quarter, we expect no-fuel unit costs to increased 1 to 2 percent year-over-year as capacity growth moderates. Debit reduction remains our top financial priority and we are progressing toward investment grade ratings, with gross leverage improving to 2.8x at the end of the first half.”
Delta reiterated its outlook for 2024 with EPS in the range of $6 to $7, compared with a consensus of $6.58, free cash flow of $3-$4 billion, and adjusted debt to EBITDAR of 2x-3x.
The Bottom Line
Delta Air Lines remains the strongest player among US airlines, with strong revenue growth but lower profitability year over year as the industry continues to normalize post-pandemic. Lower base fares from low-cost carriers impacted Delta’s economy cabin, for which revenues were flat. Delta’s CEO Ed Bastian stated “demand has been really strong, international, business and our premium sector all outperformed.” With loss-making Southwest, Spirit and JetBlue dramatically discounting economy class flights, Delta has seen a margin erosion in its economy cabin. The discounting by competitors in the lower-fare buckets has impacted margins. ”You cannot, if you are on the lower end of the industry’s food chain, continue to post losses, particularly given the health of the demand set we have all seen over the last couple of years,” stated Bastian. He went on to state that other carriers had work to do to lift their profitability and reduce over-capacity, and that there was only so much more that Delta could do on their own. That notwithstanding, Delta is on target for a strong annual performance in 2024.
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