Delta Air Lines Sets Growth Trajectory, Prioritizes Debt Reduction After Strong Q1

Delta Air Lines Inc (NYSE) shares are trading higher by ~4% premarket on Wednesday morning following the release of its first-quarter 2024 results.

Delta reported a first-quarter 2024 operating revenue growth of 8% year-over-year to $13.748 billion and adjusted operating revenue of $12.563 billion (+6% YoY), beating the consensus of $12.57 billion. 

Adjusted average fuel price of $2.76 per gallon dropped 10% from last year’s quarter. Adjusted EPS was $0.45, above the consensus of $0.36.

Total passenger revenue was $11.13 billion, a 7% increase YoY; Cargo revenue decreased 15% YoY to $178 million, and Other revenue was $2.44 billion (+14% YoY).

Delta recorded an adjusted operating income of $640 million, compared to $546 million YoY, with an adjusted operating margin of 5.1%, up ~50 bps.

Adjusted operating expenses increased by 6% YoY to $11.92 billion, and non-fuel costs were $9.23 billion for the quarter.

Delta generated an adjusted operating cash flow of $2.478 billion (-16% YoY). Adjusted net debt at quarter-end decreased ~4% Y/Y to $20.22 billion.

Adjusted debt to EBITDAR of 2.9x, down from 3.0x at the end of 2023. Return on invested capital of 13.8% on a trailing five-quarter average.

Total revenue per available seat mile increased 1% YoY. The passenger load factor was 83% vs. 81% in the first quarter 2023.

DAL reported liquidity of $7.4 billion at quarter-end, including $2.9 billion in undrawn revolver capacity.

Related: Delta Air Lines Q1 Earnings Preview: Bright Forecast With A Dash Of Boeing Drama, Solar Eclipse Spotlight

“We expect to repay at least $4 billion of debt this year and are on track to improve full year leverage. Our commitment to strengthening the balance sheet was recognized this quarter with positive outlook updates from Moody’s and Fitch, marking our continued progress towards an investment grade rating,” commented Dan Janki, Delta’s chief financial officer.

Second-quarter 2024 Outlook: On a non-GAAP basis, Delta expects revenue growth of 5%-7%, EPS of $2.20 – $2.50 versus $2.25 estimate, and operating margin of 14%-15%.

Reiterates 2024 Outlook: On a non-GAAP basis, DAL expects EPS of $6-$7 versus the $6.46 estimate, free cash flow of $3 billion-$4 billion, and Adjusted Debt to EBITDAR of 2x – 3x.

“Strong demand for travel on Delta is continuing into the June quarter where we expect total revenue growth of 5 to 7 percent compared to the June quarter 2023 on TRASM of flat to down 2 percent. Within this outlook, all geographic entities are expected to achieve unit revenue approximately flat to last year, except Latin, where we expect a double-digit decline as we lap strong performance and continue to profitably invest in the network,” said Glen Hauenstein, Delta’s president. 

Price Action: DAL shares are trading higher by 4.25% at $49.33 premarket on Wednesday.

Photo by VanderWolf Images via Shutterstock