On January 12, 2024, Delta Air Lines Inc (DAL, Financial) released its 8-K filing, announcing its financial results for the December quarter and full year 2023. The Atlanta-based airline, which operates over 4,000 daily flights to more than 280 destinations, has reported record revenue and pre-tax income for the full year, signaling a robust recovery and growth trajectory.
Financial Performance Overview
Delta's operational performance in 2023 set industry-leading standards, with full year operating revenue reaching a historic high of $54.7 billion, marking a 20% increase compared to 2022. The company's pre-tax income nearly doubled to $5.6 billion, reflecting strong demand for air travel and operational efficiency. Adjusted earnings per share (EPS) for the year was reported at $6.25, while GAAP EPS was $7.17.
The airline's financial achievements are significant for the transportation industry, which has faced numerous challenges including fluctuating fuel costs and evolving consumer preferences. Delta's ability to generate record revenue and maintain profitability underscores its operational resilience and strategic positioning in the market.
Key Financial Metrics and Commentary
Delta's adjusted operating margin for the full year stood at 11.6%, with a pre-tax margin of 9.5%. The company's adjusted debt to EBITDAR ratio improved significantly, from 5.0x at the end of 2022 to 3.0x, indicating a stronger balance sheet and reduced leverage. The return on invested capital (ROIC) also saw a notable increase, reaching 13.4%, up 5 points from the previous year.
"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," said Ed Bastian, Delta’s chief executive officer.
Delta's CEO also highlighted the company's positive outlook for 2024, with an expectation to grow full year earnings to $6 to $7 per share and generate free cash flow of $3 to $4 billion, further strengthening Delta's financial foundation.
Balance Sheet and Cash Flow
Delta's balance sheet reflects a disciplined approach to debt management and capital allocation. The company ended the year with total debt and finance lease obligations of $20.1 billion, after repaying $4.1 billion in gross debt. Operating cash flow was robust at $7.2 billion, and the company generated $2.0 billion in free cash flow, which is expected to improve by up to $2 billion in 2024.
The airline's fleet update includes an agreement with Airbus for twenty A350-1000s, with options for twenty more, signaling a commitment to fleet modernization and efficiency. This order aligns with Delta's capital expenditure and capacity targets, and is expected to enhance the airline's international widebody fleet capabilities.
Looking Ahead
Delta's guidance for 2024 is optimistic, with a forecasted earnings per share of $6 to $7 and free cash flow in the range of $3 to $4 billion. The adjusted debt to EBITDAR is projected to be between 2x and 3x. These projections reflect the airline's confidence in its ability to continue delivering strong financial performance and shareholder value.
For value investors and potential GuruFocus.com members, Delta Air Lines Inc (DAL, Financial) presents a compelling case of a resilient company with a robust financial performance and a positive outlook for continued growth. The airline's strategic investments, disciplined cost management, and commitment to operational excellence position it well for the future in the competitive transportation industry.
Explore the complete 8-K earnings release (here) from Delta Air Lines Inc for further details.
