Delta Air Lines' March quarter 2023 financial results

Delta Air Lines has just reported financial results for the March quarter and provided its outlook for the June quarter 2023. Highlights of the March quarter, including both GAAP and adjusted metrics, are on page five and incorporated here.

"Thanks to the outstanding work and dedication of the Delta team, 2023 is off to a strong start. We provided well-deserved pay increases for our people and paid more profit sharing than the rest of the industry combined. Delta is building momentum, with the best people in the industry generating nearly $5 billion of operating profit over the last twelve months," said Ed Bastian, Delta's chief executive officer. “For the June quarter, we expect to deliver record revenue, and an adjusted operating margin of 14 to 16 percent with earnings per share of $2.00 to $2.25.”

“With solid March quarter profitability and a strong outlook for the June quarter, we are confident in our full-year guidance for revenue growth of 15 to 20 percent year over year, earnings of $5 to $6 per share and free cash flow of over $2 billion,” Bastian said.

March Quarter 2023 GAAP Financial Results

Operating revenue of $12.8 billion

Operating loss of $277 million with an operating margin of (2.2)%

Pre-tax loss of $506 million with a pre-tax margin of (4)%

EPS of ($0.57)

Operating cash flow of $2.2 billion

Payments on debt and finance lease obligations of $1.2 billion

Total debt and finance lease obligations of $22 billion at quarter end

Adjusted Financial Results

Operating revenue of $11.8 billion, 45% higher than the March quarter 2022 and 14% higher than the March quarter 2019, including a 1 point impact from flying lower capacity than initially planned

Operating income of $546 million with an operating margin of 4.6%

Pre-tax income of $217 million with a pre-tax margin of 1.8%

Earnings per share of $0.25

Operating cash flow of $2.9 billion

Free cash flow of $1.9 billion

$9.5 billion in liquidity* and adjusted net debt of $21 billion at quarter end

*Includes cash and cash equivalents, short-term investments and undrawn revolving credit facilities

Revenue Environment and Outlook

"We delivered record March quarter revenue with total unit revenue that was 16 percent higher than the same period in 2019.  These results reflect the strength in the underlying demand environment and continued momentum in premium products and loyalty revenue," said Glen Hauenstein, Delta's president.  "With record advance bookings for the summer, we expect June quarter revenue to be 15 to 17 percent higher on capacity growth of 17 percent year over year."

Unit revenue strength continues, driven by consumer: Reflecting strong demand, March quarter advance cash bookings were nearly 20 percent higher than 2019. March quarter adjusted total unit revenue (TRASM) was up 16 percent versus 2019 and 23 percent higher versus 2022.

Revenue diversification continues on Premium and Loyalty momentum: Revenue from Premium products and diverse revenue streams in the March quarter was 56 percent of adjusted operating revenue. Premium revenue growth continues to outpace main cabin. Loyalty revenue improvement was driven by strong co-brand acquisitions and spend growth, with American Express remuneration for the March quarter a record $1.7 billion, approximately 38 percent higher year over year.

Business travel improvement led by International and small and medium-sized business demand: Small and medium business bookings stepped up in the March quarter to fully recovered versus 2019 levels. International Corporate sales* accelerated sequentially to approximately 90 percent recovered to 2019 levels, excluding China. Domestic Corporate sales* in the March quarter were approximately 85 percent recovered to 2019 levels. Recent corporate survey results indicate that 96 percent of companies expect their travel will increase or stay the same sequentially in the June quarter.

 *

Corporate sales include tickets sold to corporate contracted customers, including tickets for travel during and beyond the referenced time period

Cost Performance and Outlook

"Non-fuel costs are progressing as expected.  For the June quarter, we expect non-fuel unit costs to be 1 to 3 percent higher year over year," said Dan Janki, Delta's chief financial officer.  "We remain confident in our ability to deliver unit cost declines in the second half of 2023, while generating industry-leading operating margins of 10 to 12 percent for the full year."

March Quarter 2023 Cost Performance 

March quarter operating expense of $13.0 billion and total adjusted operating expense of $11.3 billion

March quarter adjusted non-fuel costs of $8.5 billion

March quarter non-fuel CASM was 4.7 percent higher year over year, including a 1 point impact from flying lower capacity than initially planned primarily due to winter storms

Adjusted fuel expense of $2.7 billion was up 30 percent compared to the March quarter 2022

Adjusted fuel price of $3.06 per gallon includes a refinery benefit of 25¢ per gallon

Fuel efficiency, defined as gallons per 1,000 ASMs, was 14.5, a 6 percent improvement versus 2019

Balance Sheet, Cash and Liquidity

"Record March quarter free cash flow of $1.9 billion enabled $1.2 billion of debt repayment and positions us to complete our full year planned debt reduction in the first half of the year," Janki said.  "We are on track to reduce leverage to 3x to 3.5x in 2023 and remain committed to returning to investment grade metrics by next year.  The recent upgrades on our debt rating outlooks by S&P and Fitch recognize our continued progress on delevering our balance sheet."

Adjusted net debt of $21 billion at March quarter end, a reduction of $1.3 billion from the end of 2022

Payments on debt and finance lease obligations of $1.2 billion in the March quarter. This included $455 million of maturities and $695 million of accelerated repurchases of debt instruments with an average interest rate of 7 percent

Weighted average interest rate of 4.7 percent with 85 percent fixed rate debt and 15 percent variable rate debt

Adjusted operating cash flow was a March quarter record of $2.9 billion, and with gross capital expenditures of $1.1 billion, free cash flow was $1.9 billion

Air Traffic Liability ended the quarter at $11.2 billion, up $2.9 billion compared to the end of 2022

Liquidity of $9.5 billion at quarter-end, including $2.9 billion in undrawn revolver capacity

March Quarter Highlights

Operations and Fleet

Earned the Cirium Platinum Award for global operational excellence as North America's most on-time airline, reflecting Delta's leading on-time performance while limiting disruption to customers

Achieved network system on-time arrivals of 81 percent in the quarter, the most on-time among U.S. carriers reporting to the DOT1

Named top U.S. airline by Wall Street Journal for 2022, ranking No. 1 in three of seven categories, including operations and fleet

Opened state-of-the-art Pratt & Whitney Geared Turbofan engine maintenance shop, supporting long-term MRO growth

Took delivery of 6 new aircraft in the quarter, 4 of which were A321neos

Culture and People

Celebrated Delta people with $563 million in profit sharing for 2022 performance, paid on Valentine's Day

Honored by Fortune as one of the World's Most Admired Companies for the 10th year in a row, climbing six spots to No. 12

Announced a 5 percent base pay increase for eligible employees worldwide, effective April 1, 2023, maintaining our philosophy of industry-leading pay for industry-leading performance

Delta pilots ratified a new 4-year Pilot Working Agreement, maintaining our premium position in pilot pay

Ranked the top airline on Glassdoor's "Best Places to Work" list for the seventh year

Announced a new pilot academy, The Delta Propel Flight Academy, offering up to $20k in financial support

Partnered with Operation HOPE and Fidelity Investments to help employees earn $1,000 in emergency savings as part of an educational and coaching program

Customer Experience and Loyalty

Welcomed 3 million new SkyMiles members in the quarter, marking a new quarterly record

Achieved record American Express remuneration and co-brand card acquisitions, with increasing mix of premium card acquisitions

Introduced fast, free Wi-Fi on Feb. 1, with full availability across Delta's global fleet planned by the end of 2024

Claimed the No. 8 spot on Fast Company's list of Most Innovative Companies in the travel category

In partnership with Hertz, announced enhanced SkyMiles rewards based on spend on car rentals booked on Delta.com or the Fly Delta App; SkyMiles members can also earn from bookings through Hertz channels

Consolidated operations in JFK to Terminal 4, with 10 new gates now open on Concourse A with upgrades from check-in to gate areas

Unveiled a new, state-of-the-art cargo cooler facility at JFK, the largest of its kind on-site, offering an upgraded experience for customers with temperature-sensitive cargo

Announced Delta will be the only U.S. carrier to offer service between Los Angeles and Auckland, New Zealand beginning this fall

Refreshed onboard food and beverage menu, featuring the return of the signature Delta One dessert cart, espresso martinis and premium rosé wine

As part of the Delta-LATAM Joint Venture, announced the launch of daily service from JFK to Rio de Janeiro starting in December 2023

Opened Delta's new Sky Club at Kansas City's recently transformed international airport, deepening ties in the Midwest as the only carrier lounge at the airport

Environmental, Social and Governance

Improved fuel efficiency by 6 percent in the March quarter versus 2019 through fleet renewal and other sustainability initiatives

Outlined Delta's path to net zero-emissions and more sustainable travel by 2050, including the sustainable fuel market, innovating fleet, addressing single-use plastics and encouraging net-zero supply chains

Added Elizabeth City State University as a partner school in the Delta Propel Program, emphasizing Delta's commitment to strengthening the workforce pipeline and creating equitable opportunities in aviation

Honored National Slavery and Human Trafficking Awareness Month this January with a variety of initiatives to educate and empower our people and our customers to take action against human trafficking

Presented with UNCF's Keeper of the Flame Award for outstanding support of their mission to help historically Black colleges and universities prepare students who will become future leaders of our nation

1 Based on FlightStats data for A14 arrival system-wide for flights flown Jan. 1 – Mar. 31, 2023, compared to US carriers reporting to the DOT

	GAAP		$ Change	% Change
($ in millions except per share and unit costs)	1Q23	1Q22
Operating loss	(277)	(783)	506	65 %
Operating margin	(2.2) %	(8.4) %	6.2 pts	74 %
Pre-tax loss	(506)	(1,200)	694	58 %
Pre-tax margin	(4.0) %	(12.8) %	8.8 pts	69 %
Net loss	(363)	(940)	577	61 %
Loss per share	(0.57)	(1.48)	0.91	61 %
Operating revenue	12,759	9,348	3,411	36 %
Total revenue per available seat mile (TRASM) (cents)	20.80	18.04	2.76	15 %
Operating expense	13,036	10,131	2,905	29 %
Cost per available seat mile (CASM) (cents)	21.25	19.56	1.69	9 %
Fuel expense	2,676	2,092	584	28 %
Average fuel price per gallon	3.01	2.79	0.22	8 %
Operating cash flow	2,235	1,771	464	26 %
Capital expenditures	1,000	1,766	(766)	(43) %
Total debt and finance lease obligations	21,958	25,557	(3,599)	(14) %
	Adjusted		$ Change	% Change
($ in millions except per share and unit costs)	1Q23	1Q22
Operating income/(loss)	546	(793)	1,339	NM
Operating margin	4.6 %	(9.7) %	14.3 pts	NM
Pre-tax income/(loss)	217	(1,037)	1,254	NM
Pre-tax margin	1.8 %	(12.7) %	14.5 pts	NM
Net income/(loss)	163	(784)	947	NM
Diluted earnings/(loss) per share	0.25	(1.23)	1.48	NM
Operating revenue	11,842	8,161	3,681	45 %
TRASM (cents)	19.30	15.75	3.55	23 %
Operating expense	11,296	8,954	2,342	26 %
Non-fuel cost	8,506	6,858	1,648	24 %
Non-fuel unit cost (CASM-Ex) (cents)	13.86	13.24	0.62	4.7 %
Fuel expense	2,718	2,097	621	30 %
Average fuel price per gallon	3.06	2.79	0.27	10 %
Operating cash flow	2,942	1,758	1,184	67 %
Free cash flow	1,853	197	1,656	NM
Gross capital expenditures	1,090	1,565	(475)	(30) %
Adjusted net debt	20,964	20,863	101	— %

DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
	Three Months Ended
	March 31,
(in millions, except per share data)	2023	2022	$ Change	% Change
Operating Revenue:
Passenger	$      10,411	$        6,907	$        3,504	51 %
Cargo	209	289	(80)	(28) %
Other	2,139	2,152	(13)	(1) %
Total operating revenue	12,759	9,348	3,411	36 %
Operating Expense:
Salaries and related costs	3,386	2,826	560	20 %
Aircraft fuel and related taxes	2,676	2,092	584	28 %
Ancillary businesses and refinery	1,125	1,382	(257)	(19) %
Contracted services	1,010	753	257	34 %
Pilot agreement and related expenses	864	—	864	NM
Aircraft maintenance materials and outside repairs	585	465	120	26 %
Landing fees and other rents	584	504	80	16 %
Depreciation and amortization	564	506	58	11 %
Regional carrier expense	559	491	68	14 %
Passenger commissions and other selling expenses	500	312	188	60 %
Passenger service	416	275	141	51 %
Aircraft rent	132	122	10	8 %
Profit sharing	72	—	72	NM
Other	563	403	160	40 %
Total operating expense	13,036	10,131	2,905	29 %
Operating Loss	(277)	(783)	506	(65) %
Non-Operating Expense:
Interest expense, net	(227)	(274)	47	(17) %
Gain/(loss) on investments, net	122	(147)	269	NM
Loss on extinguishment of debt	(22)	(25)	3	(12) %
Pension and related (expense)/benefit	(61)	73	(134)	NM
Miscellaneous, net	(41)	(44)	3	(7) %
Total non-operating expense, net	(229)	(417)	188	(45) %
Loss Before Income Taxes	(506)	(1,200)	694	(58) %
Income Tax Benefit	143	260	(117)	(45) %
Net Loss	$         (363)	$         (940)	$           577	(61) %
Basic Loss Per Share	$        (0.57)	$        (1.48)
Diluted Loss Per Share	$        (0.57)	$        (1.48)
Basic Weighted Average Shares Outstanding	639	637
Diluted Weighted Average Shares Outstanding	639	637

DELTA AIR LINES, INC.
Passenger Revenue
(Unaudited)
	Three Months Ended
	March 31,
(in millions)	2023	2022		$ Change	% Change
Ticket - Main cabin	$       5,223	$       3,448		$       1,775	51 %
Ticket - Premium products	4,016	2,538		1,478	58 %
Loyalty travel awards	743	543		200	37 %
Travel-related services	429	378		51	13 %
Total passenger revenue	$     10,411	$       6,907		$       3,504	51 %

DELTA AIR LINES, INC.
Other Revenue
(Unaudited)
	Three Months Ended
	March 31,
(in millions)	2023	2022	$ Change	% Change
Refinery	$          916	$       1,187	$        (271)	(23) %
Loyalty program	726	571	155	27 %
Ancillary businesses	231	209	22	11 %
Miscellaneous	266	185	81	44 %
Total other revenue	$       2,139	$       2,152	$          (13)	(1) %

DELTA AIR LINES, INC.
Total Revenue
(Unaudited)
				Increase (Decrease)
				1Q23 vs 1Q22
Revenue		1Q23 ($M)		Change	Unit Revenue	Yield	Capacity
Domestic	$	7,594		37 %	27 %	21 %	7 %
Atlantic		1,244		131 %	38 %	20 %	67 %
Latin America		1,132		66 %	50 %	33 %	11 %
Pacific		441		253 %	79 %	(19) %	97 %
Total Passenger	$	10,411		51 %	27 %	17 %	18 %
Cargo Revenue		209		(28) %
Other Revenue		2,139		(1) %
Total Revenue	$	12,759		36 %	15 %
Third Party Refinery Sales		(916)
Total Revenue, adjusted	$	11,842		45 %	23 %

DELTA AIR LINES, INC. Statistical Summary (Unaudited)
	Three Months Ended
	March 31,
	2023	2022	Change
Revenue passenger miles (millions)	49,687	38,700	28	%
Available seat miles (millions)	61,351	51,810	18	%
Passenger mile yield (cents)	20.95	17.85	17	%
Passenger revenue per available seat mile (cents)	16.97	13.33	27	%
Total revenue per available seat mile (cents)	20.80	18.04	15	%
TRASM, adjusted - see Note A (cents)	19.30	15.75	23	%
Cost per available seat mile (cents)	21.25	19.56	9	%
CASM-Ex  - see Note A (cents)	13.86	13.24	5	%
Passenger load factor	81 %	75 %	6	pts
Fuel gallons consumed (millions)	888	751	18	%
Average price per fuel gallon	$         3.01	$         2.79	8	%
Average price per fuel gallon, adjusted - see Note A	$         3.06	$         2.79	10	%

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