Delta Posts a $2 Billion Quarterly Profit, but Shares Dip as Airline Trims Forecast of 2024 Earnings

AP

12:06 JST, January 13, 2024

Delta Air Lines earned $2 billion in the fourth quarter, posted record full-year revenue, and says it is buying more planes to boost its international flying.

The airline’s shares fell 9% Friday, however, as the company pulled back on its profit forecast for 2024.

Delta said full-year earnings will be $6 to $7 a share — down from an earlier prediction of more than $7 a share. Analysts had already trimmed their expectations to $6.50 a year, but the update from Delta was enough to spook investors.

Delta is the first U.S. airline to post fourth-quarter results, and its report sent shares of American, United, Southwest, Alaska and JetBlue down between 4% and 11%.

Delta said Friday that it will buy 20 Airbus A350s and take options to buy 20 more of the long-range jetliners. Delta expects to get the first ones in 2026.

The A350s will have more premium seating than the planes they replace, which will play into Delta’s strategy of pursuing high-end travelers who are more insulated from ups and downs in the economy.

Airlines were helped in 2023 by strong demand for travel from people who had spent most of the pandemic cooped up at home. Delta passengers flew 19% more miles last year than they did in 2022.

CEO Ed Bastian said he expects that trend to continue.

“We actually saw the highest cash sales day in our history on Tuesday,” Bastian said in an interview. “So our consumer is healthy (financially), our consumer wants to travel. That tells us it’s going to be a very good year, 2024.”

Bastian said, however, he was concerned about higher maintenance costs, which he blamed on supply-chain disruptions, and an inability to receive new planes on schedule because of disruptions at engine and aircraft makers.

Delta posted fourth-quarter net income of $2.04 billion, more than doubling the profit of $828 million in the same period the year before.

Excluding special items, its adjusted earnings were $1.28 per share. That beat analysts’ average forecast of $1.16 per share, according to a survey by FactSet.

Revenue rose 6% to $14.22 billion. Passenger revenue increased 12%, and spending on premium services — like sitting in business class instead of the main cabin — surged 15%.

However, Delta’s refinery in Pennsylvania brought in $579 million less revenue than a year earlier, a 51% drop.

On the cost side, spending for labor soared 23% — a reflection of higher wages, especially from a contract that union pilots ratified in March of last year.

For the full year, Delta’s revenue rose 15% to more than $58 billion. Net income more than tripled, to $4.61 billion, up from $1.32 billion in 2022.

The full-year profit fell short of pre-pandemic 2019, when Atlanta-based Delta earned $4.77 billion, but it was enough to buy more planes.

Delta has a mix of Airbus and Boeing planes in its fleet of more than 900 planes, not counting its regional affiliates. It already had 28 A350s at the end of September with commitments to buy another 16. Friday’s order could push the total of A350s to more than 80 if the options are used.

The A350 competes with Boeing’s 787. Both have fuselages and wings made of carbon-fiber-reinforced composites. Delta doesn’t use the 787, although it has other Boeing jets.

Bastian said Boeing’s current problems, including a government investigation into parts on its 737 Max 9 jet, were not a factor in Friday’s order. He said the company wanted continuity with the A350.

Delta doesn’t have any Max jets, but it has committed to buy 100 of the larger Boeing 737 Max 10, a plane that has not yet been certified by the Federal Aviation Administration.

“We need Boeing to do well,” he said. “It’s a great company. It’s an important company to our country and our industry.”