24Q1 DAL earnings

earnings summary

Here is a summary of the key points from Delta Air Lines’ Q1 2024 earnings call, with an emphasis on earnings results, guidance, market conditions, and sentiment:

Earnings Results and Guidance:

• Q1 pretax earnings of $380 million, or $0.45 per share, a $0.20 improvement over last year. Revenue was up 6% to a record $12.6 billion.
• Reaffirmed full-year guidance of earnings $6-7 per share, free cash flow of $3-4 billion, and leverage ratio of 2.5x.
• Q2 guidance: Expects highest quarterly revenue in history, 14-15% operating margin, and earnings of $2.20-2.50 per share. Capacity expected to be up 6-7% with unit revenue flat to down 2%.

Market Conditions and Demand:

• Seeing strong spring/summer travel demand, with the 11 highest sales days in company history occurring in 2024. Travel is a top purchase priority for consumers.
• Business travel demand has meaningfully accelerated, growing mid-teens over 2023. 90% of companies plan to maintain or increase Q2 travel volumes. Expect record corporate revenues in 2H 2024.
• Domestic revenue up 5% with record Q1 unit revenues up 3%. International revenue up 12% with transatlantic strength offsetting LatAm and Pacific rebuild. Premium revenues up 10%.
• Management cites the most constructive backdrop in years given strong demand and the industry’s focus on financial returns over market share. Delta expects progressive domestic improvement through 2025 as they restore core hub capacity.

Themes and Trends:

• Operational reliability is a key priority and competitive advantage. Delta is outperforming on completion factor and cancellations.
• Premium products, customer experience, and loyalty are strategic focuses for revenue growth. Highlights include premium seat expansion, new Delta One lounges, aircraft upgrades, and free WiFi.
• American Express partnership going strong, on track for $10B long-term target. Loyalty and brand affinity at record levels.
• Focused on debt reduction to strengthen the balance sheet. On track to lower leverage to 2.5x by year-end.

Sentiment: The tone of the call was very optimistic and confident. Management feels they are in a position of strength competitively and that industry fundamentals are the most favorable in years. They cite Delta’s leading brand, operations and financial results as key advantages.

Guidance was upbeat, with expectations for record revenue and margins this summer. The demand commentary was also bullish, with robust consumer and accelerating corporate trends.

The main watchpoints seem to be the ongoing rebuild of the international network and the normalization of travel credits creating a modest headwind this year. But overall, management appears quite enthusiastic about both the current state of the business and future opportunities to drive earnings and cash flow higher.