Release Date: July 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Delta Air Lines Inc (DAL, Financial) reported pretax earnings of $2 billion or $2.36 per share, marking the second highest quarterly earnings in its history.
- The company achieved a 15% operating margin and generated $1.3 billion of free cash during the quarter, bringing first half free cash flow to $2.7 billion.
- Delta Air Lines Inc (DAL) announced a 50% increase to its quarterly dividend, reflecting strong cash generation and balance sheet progress.
- The company was recognized as the 2024 Global Airline of the Year by Air Transport World and ranked as the best US airline by The Points Guy for the sixth consecutive year.
- Delta Air Lines Inc (DAL) continues to invest in premium offerings, including new Delta One Lounges and upgraded Delta Premium Select cabins, enhancing customer experience and loyalty.
Negative Points
- Total unit revenue was down 2.6% compared to last year, impacted by accelerated domestic industry seat growth and temporary disruptions such as the Paris Olympics.
- Main cabin unit revenue trends were negatively affected by increased seat growth beyond normal demand growth during the summer months.
- The company faces ongoing challenges with aircraft delivery delays from both Boeing and Airbus, impacting operational planning.
- Non-fuel unit costs are expected to increase by 1% to 2% year-over-year in the September quarter, driven by capacity growth and investments in people and brand.
- Delta Air Lines Inc (DAL) anticipates continued pressure on unit revenue from domestic and international capacity dynamics, requiring ongoing adjustments to maintain profitability.
Q & A Highlights
Q: Can you help bridge the gap regarding the US domestic market for September? Is it just industry supply getting better or something else?
A: We have about a September 3 bookings domestically on hand, which is substantially better than the base we had going into July and August. The industry's capacity is coming down, and we are moving back into a more normalized business season where business travel tends to tick up from August to September. We are confident about our September numbers and see substantial improvements both domestically and internationally. - Glen Hauenstein, President
Q: How confident are you in structural changes in the industry going forward?
A: The industry is reacting quickly to oversupply, which is different from years ago. The health of the industry is broadly good, and those providing real value will be rewarded. The experience economy is driving high demand, and the industry needs to return its cost of capital. Delta is driving 50% of the overall industry profitability, and as things get better, Delta will benefit. - Edward Bastian, CEO
Q: How are you managing through supply chain issues, especially with Airbus and Boeing deliveries?
A: Airbus continues to have certain delivery challenges, but Delta is insulated somewhat as one of their largest customers. We are largely taking the delivery schedule we anticipated for the year. We don't anticipate any problems with aircraft needed for 2025 capacity. - Edward Bastian, CEO
Q: Can you unpack the trends in the premium cabin for the first half and outlook for the second half?
A: Delta Premium Select has exceeded expectations with load factors in the mid-to-high 80s and fare structures more than 2x coach fares. Domestic first class and Delta One continue to lead in margins. We are excited to roll out DPS on transcontinental flights this fall, which looks strong in advance bookings. - Glen Hauenstein, President
Q: How are you thinking about the PSP loans resetting to a variable rate in 2025 and 2026?
A: We continue to focus on deleveraging. Our first tranche doesn't come due until the second quarter of next year, and we will look at market conditions at that time. We will discuss more details as we get closer to the end of the year and into next year. - Daniel Janki, CFO
Q: How should we think about Delta's capacity plans entering 2025?
A: We are not giving specific capacity growth for 2025 yet. It's important to note the difference between seats and ASMs. Our capacity growth in seats was about 5% or less, and we are focusing on seats as our measure domestically. - Glen Hauenstein, President
Q: How do you think about the industry capacity issues improving or worsening in 2025?
A: We are confident in our Airbus delivery stream and don't anticipate any Boeing aircraft deliveries over the next few years. It will take some time before Boeing gets their cadence back. - Edward Bastian, CEO
Q: Can you provide more detail on the Japan situation and business travel between the US and Japan?
A: US-Japan business travel remains strong. The yen hitting 160 has made Japan a very attractive destination for US travelers, leading to record numbers of US tourists heading to Japan. - Glen Hauenstein, President
Q: Are you still in discussions to develop a partnership or sell the refinery?
A: The refinery has been running very well, and the team is doing a great job. It remains a key part of Delta. - Daniel Janki, CFO
Q: How are you managing headcount trends into next year?
A: This year, our headcount will grow just under 2% while our network grows in mid-single digits. We are seeing efficiencies as we restore our core hubs and grow into our resources. - Daniel Janki, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
