Delta Airlines
In Q1, flight capacity was at 84% compared to pre-pandemic levels and should exceed 90% in Q2. Investors were also closely watching margins to see what type of impact would be felt by higher fuel prices. Compared to the pre-pandemic period, total fuel costs were 6% higher even with lower capacity. This, in addition to a tight labor market and rising wages, are the major headwinds for Delta going forward.
Inside the Numbers
In Q1, Delta reported an adjusted loss per share of $1.23 which was slightly steeper than expectations of $1.27 per share. Revenue came in at $9.35 billion vs analysts' forecast of $8.92 billion. Revenue was about 11% lower than 2019 levels with most of the gap due to lower international and business travel, while domestic travel is already above pre-pandemic levels.
However, the stock jumped as the company said unit revenues should rise double digits during Q2 compared to 2019. It sees sales returning to 97% of pre-pandemic levels in history due to the strongest month of booking in its entire history in March.
Despite some economic challenges like inflation, the company said that consumers are prioritizing travel spending due to pent-up demand. The airline continues to add capacity to meet higher travel volumes. Customers are absorbing higher prices as fares are 20% higher than 2019.
Delta also addressed concerns of a shortfall in staff, by saying that it believes it's ramped up hiring over the past year. The company was also hampered by the omicron outbreak which resulted in flights being cancelled due to many pilots and attendants being out sick.
Other parts of the business area also showing momentum as its credit card division generated $1.2 billion in revenue, a 25% increase from 2019, and spending among cardholders was up 35% compared to pre-pandemic levels.
Looking ahead, Delta's business is on fire due to the pent-up demand for travel which should be a potent tailwind over the next couple of years. Currently, this is strong enough to overcome higher fuel and labor costs. In many ways, Delta is a bet that travel demand will remain strong, while these pressures will ebb.