Late-Quarter Surge Breeds Optimism for Delta Air Lines

Delta lost $940 million in the first quarter of 2022, operating on revenue of $9.3 billion. [Courtesy: Delta Airlines]

Despite a sluggish start to the quarter due to travel restrictions and increasing fuel prices, Delta Air Lines (NYSE: DAL) CEO Ed Bastian said Wednesday that strong numbers late in the quarter prove that travel demand is rebounding and his company is confident that it will turn a profit in the second quarter. 

"Consumer demand accelerated through the quarter, highlighted by solid spring break performance. As omicron faded, offices reopened, and travel restrictions were lifted, resulting in an improvement in business travel demand and a stronger fare environment," the airline said in a statement.

Delta lost $940 million in the first quarter of 2022, operating on revenue of $9.3 billion. On an adjusted basis, its $8.2 billion revenue for the quarter was 79 percent of the 2019 levels, which the company said was ahead of its initial guidance. Compared to the first quarter of 2019, total passenger revenue was 75 percent recovered, even though the airline only achieved 83 percent capacity.

"Delta is well-positioned to capitalize on robust consumer demand and an accelerating return of business and international travel,” Delta president Gel Hauenstein said in the release. “The strength of Delta's brand has never been more evident with record-setting performance for co-brand card acquisitions, co-brand spends, and SkyMiles acquisitions in March," said Glen Hauenstein, Delta's president in the press release.

Fuel Prices Climb

However, with ongoing geopolitical issues disrupting the supply chain and energy market, Delta says its fuel bill climbed to $2.1 billion, 6 percent more than it spent in 2019. This time, overall capacity was down 17 percent. Bastian said the company expected to recapture higher fuel prices from high customer demand on the earnings call. For customers, that could mean higher prices. To offset fuel prices, rather than operational changes, the company is mainly relying on its Monroe refinery which CFO Dan Janki on the call described as a “unique benefit.”

“On fuel for the June quarter, we expect an adjusted fuel price per gallon of $3.20 to $3.35. This includes a $0.20 benefit from the refinery, and these are based on the forward curves as of last Friday,” Janki said.

The most recent Consumer Price Index published this week indicated that airline fares were 10.7 percent more in March than February, with inflation being the highest since 1981. However, Bastain was optimistic about customers' willingness to spend on travel, over other goods, or services, after years of lockdown. "Consumers have not been traveling over the last two years. So, this is a category that they're prioritizing," Bastian said.

"People are looking for experiences. You're seeing a significant shift coming out of goods and retail into experiences and services."

Ramped up Summer Schedule

Bastian said his company would begin ramping up its schedule ahead of the summer, as much as 84 percent of its 2019 level, to meet the demand. He also said that the airline has also preemptively hired more than 15,000 people over the last 18 months, including adding 1,000 new pilots between July of 2021 and this summer. 

Also, while the airline dropped its degree requirement for pilots, it added Hampton University to its Propel Collegiate Pilot Career Path Program, the airline’s first such partnership with a historically Black university.

Delta expects capacity for the second quarter of 2022 to reach 84 percent of 2019 levels. It also projects revenue to recover as much as 97 percent of the revenue the company earned the second quarter of 2019.

The airline's share price was up 6 percent Wednesday morning, trading at $40 following the results.

Michael Wildes holds a master’s degree in Logistics & Supply Chain Management, and a bachelor’s degree in Aeronautical Science, both from Embry-Riddle Aeronautical University. Previously, he worked at the university’s flight department as a Flight Check Airman, Assistant Training Manager, and Quality Assurance Mentor. He holds MEI, CFI & CFII ratings. Follow Michael on Twitter @Captainwildes.

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