Delta Air Lines Inc (DAL) Q3 2024 Earnings Call Highlights: Strong Financial Performance Amid ...

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  • Earnings Per Share (EPS): Impacted by $0.45 due to the CrowdStrike-caused outage.

  • Operating Margins: Delivered double-digit operating margins.

  • Free Cash Flow: Nearly $3 billion year-to-date.

  • Profit Sharing Accrual: Nearly $1 billion year-to-date towards next February's profit sharing.

  • Revenue: September quarter revenue consistent with latest guidance.

  • Corporate Travel Sales: Up 7% during the quarter.

  • American Express Remuneration: $1.8 billion, up 6% year-over-year.

  • Cargo Revenue: 27% higher than last year.

  • Pretax Income: $1.3 billion for the September quarter.

  • Fuel Prices: Declined 9% over prior year, averaging $2.53 per gallon.

  • Operating Cash Flow: $6.2 billion year-to-date.

  • Debt Repayment: $2.4 billion year-to-date, including $900 million of early repayments.

  • Gross Leverage: Ended the quarter at 2.9 times.

  • December Quarter Earnings Guidance: Expected to be $1.60 to $1.85 per share.

  • December Quarter Operating Margins: Expected to be 11% to 13%.

Release Date: October 10, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Delta Air Lines Inc (NYSE:DAL) reported strong financial performance with $1.3 billion of pretax income for the September quarter.

  • The company achieved double-digit operating margins and nearly $3 billion of free cash flow year-to-date.

  • Delta's on-time performance is the best in the industry, and its completion factor leads network carriers.

  • The company has accrued nearly $1 billion year-to-date towards profit sharing, expected to be among the top in its history.

  • Delta's SkyMiles membership is attracting a younger consumer, with 3 million more active members under 40 years of age.

Negative Points

  • The CrowdStrike-caused outage had a $0.45 impact on Delta's earnings per share.

  • Hurricane Milton led to the cancellation of approximately 600 flights, impacting operations.

  • Unit costs grew by 5.7%, including impacts from the CrowdStrike outage and employee travel pass rewards.

  • The company faces ongoing constraints in New York airspace due to a shortage of air traffic controllers.

  • Domestic travel demand is expected to be impacted by the election, resulting in a one-point impact on system unit revenue for the quarter.

Q & A Highlights

Q: Can you explain the impact of the election on Delta's revenue trends and how you differentiate it from consumer weakness? A: Glen Hauenstein, President, explained that the election impact is evident in the trend lines, with markets performing well before and after the election weeks, which are underperforming. This pattern is consistent across domestic and short-haul Latin markets, indicating it's not a consumer weakness but a temporary election-related dip.

Q: How is Delta approaching domestic capacity given lower-cost airlines are cutting capacity? A: CEO Ed Bastian mentioned that Delta is excited about reaching pre-COVID capacity levels in markets like Atlanta. He hinted that more details would be shared at the upcoming Investor Day, suggesting a strategic approach to capacity management.

Q: What are Delta's expectations for corporate travel recovery in 2025, and how might it influence the network? A: Glen Hauenstein noted that Delta is well-positioned to accommodate business customers without needing significant network rebalancing. The focus will be on allocating less capacity to lower fare buckets as corporate travel demand improves.

Q: Can you provide more color on unit revenue projections for the fourth quarter by entity? A: Glen Hauenstein highlighted that domestic and transatlantic markets are leading in revenue growth. He expressed optimism about the transatlantic market due to capacity adjustments and robust demand, while Pacific and Latin markets are also showing positive trends.

Q: How is Delta leveraging technology and AI for operational improvements? A: CEO Ed Bastian emphasized that Delta is in the early stages of exploring AI's potential for predictive modeling and efficiency improvements. The focus is on ensuring a reliable technology foundation to leverage AI effectively in the future.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.