Delta Air Lines Reports Record-Breaking Holiday Season and Strong Financial Performance
2024-01-24
Delta Air Lines recently held its earnings call to discuss the company's financial results for the December quarter and full year 2023. The call was attended by CEO Ed Bastian, President Glen Hauenstein, and CFO Dan Janki. During the call, several key topics were covered, highlighting the company's strong performance, optimistic outlook, and focus on operational excellence.
In terms of financial performance, Delta Air Lines reported earnings of $1.1 billion, or $1.28 per share, for the fourth quarter of 2023. The company had a record-breaking holiday season, carrying 9 million customers and achieving industry-leading operational performance. For the full year of 2023, Delta Air Lines reported earnings of $6.25 per share, the second-highest EPS result in its history. The company also generated $2 billion in free cash flow and invested $5.3 billion back into the business in 2023. Delta improved its leverage by two full turns and achieved a return on invested capital of 13.4% in 2023.
Employee recognition and profit-sharing were also discussed during the call. Delta Air Lines announced that it will reward its employees with $1.4 billion in profit-sharing on Valentine's Day, which is approximately 10% of eligible 2023 compensation. These profit-sharing payments are expected to be more than the combined payments of Delta's three largest competitors. The company was also recognized as the world's 12th most admired company by Fortune and the 13th best employer in the country by Glassdoor. Additionally, Delta was named the most on-time airline by Cirium.
Looking ahead, Delta Air Lines shared its future plans and guidance. The company plans to grow its capacity by 3% to 5% in 2024 and expects earnings of $6 to $7 per share. Delta aims to reduce leverage, advance its balance sheet, and continue investing in its future. In 2023, the company delivered record revenues of $55 billion, which is about 20% higher than pre-pandemic levels. Furthermore, 55% of Delta's revenue comes from diversified revenue streams, and loyalty revenue was up 19% in 2023. Delta has also been named No. 1 in the Business Travel News Airline Survey for an unprecedented 13th consecutive year. The technology and financial services sectors saw notable traction in corporate sales for Delta in the December quarter.
However, the call also addressed challenges and supply chain issues. The cost and constraints in the supply chain industry continue to be a problem, hindering growth and increasing costs. Engine providers and suppliers, particularly Pratt, are facing challenges in the post-pandemic world. Higher turn times in the supply chain delay entry into service and increase costs.
Operational excellence and efficiency gains were emphasized during the call. Delta Air Lines' focus in a normalized growth environment is on operational performance and fine-tuning. The company has taken actions to improve maintenance and reliability, including proactive reliability measures and increased touch time on aircraft. Optimization opportunities exist across every part of the business, and the company aims to achieve a target of $10 billion in free cash flow between 2023 and 2025. The planning horizon is being extended to look out on a rolling basis for 12, 18, 24, and 36 months. Delta is focused on restoring its most profitable core hubs and delivering efficiency gains across the enterprise.
In terms of market outlook and demand, the transatlantic market is performing well, with strong demand and expected unit revenue growth in the March quarter. Seasonality has extended from April through October, with strong travel to traditional European destinations. Mexican and Caribbean beaches are experiencing a capacity increase of 20% to 30%. The company expects positive growth in the Pacific region and strong profitability in South America. The early returns for spring and summer bookings are favorable, with high single-digit unit revenue growth.
Overall, Delta Air Lines' earnings call highlighted the company's strong financial performance, optimistic outlook, and focus on operational excellence. Despite challenges in the supply chain industry, Delta remains committed to delivering growth, improving efficiency, and providing a positive travel experience for its customers.