Delta Air Lines, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Dollar amounts are in millions except per-share data. Delta operates an airline business and a refinery segment. Ernst & Young conducted an interim review, not an audit, and reported no material modifications needed for GAAP conformity.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Operating revenue | $13,748 | $12,759; up 8% |
| Operating income (loss) | $614 | $(277); operating margin about 4.5% versus (2.2%) |
| Net income (loss) | $37; diluted EPS $0.06 | $(363); diluted EPS $(0.57) |
| Operating cash flow | $2,408 | $2,235 |
| Free cash flow (non-GAAP) | $1,378 | Not provided in the supplied reconciliation for Q1 2023 |
| Capital expenditures | $1,193 | $1,000 |
| Cash and cash equivalents; short-term investments | $3,877; $589 | Cash was $2,741 at Dec. 31, 2023; short-term investments were $1,127 |
| Total debt, net of issuance costs | $18,127 | $18,610 at Dec. 31, 2023 |
Reported operating expenses were $13,134, up 1%. Total operating cost per available seat mile (CASM) declined 6%; adjusted non-fuel unit cost (CASM-Ex, non-GAAP) increased 1.5%. Adjusted revenue excluding third-party refinery sales increased 6% to $12,563; adjusted TRASM declined 0.7% to 19.17 cents. These adjusted measures are non-GAAP and should be considered alongside GAAP results.
At March 31, liquidity, defined by Delta as cash, cash equivalents, short-term investments and available revolving credit, was $7.4 billion, including about $2.9 billion of undrawn revolver capacity. Delta paid down $712 million of debt and finance lease obligations and paid $64 million in dividends. Debt covenants were met.
Material changes and drivers
- Revenue growth reflected 7% higher capacity and continued travel demand, particularly for premium products. Passenger revenue rose 7%; premium ticket revenue rose 10%. Total passenger revenue increased 7% while passenger unit yield declined 2%; load factor improved 2 percentage points to 83%.
- Operating income improved by $891 million from Q1 2023. The prior-year quarter included $864 million of pilot agreement and related expenses, including a $735 million ratification payment and about $130 million of benefit adjustments.
- Salary and related costs increased 12%, reflecting wage increases, profit sharing and approximately 5,000 additional employees year over year. Fuel expense declined 3%, principally as average fuel price fell 7%; fuel prices remain volatile.
- Non-operating expense increased to $492 million from $229 million, mainly because investment results shifted from a $122 million gain to a $227 million loss.
- Refinery segment operating income fell to $49 million from $222 million, primarily due to lower pricing. Equity investments declined to $3,247 million from $3,457 million at year-end, with investment valuation changes affecting reported results.
Outlook, risks and contingencies
- Management expects positive operating cash flow for the remainder of 2024 and believes cash, short-term investments and operating cash flows will meet liquidity needs over the next 12 months. No specific full-year earnings guidance is stated in the supplied filing text.
- Expected 2024 capital spending is approximately $5.0 billion, excluding the LaGuardia project. Delta expects about $400 million of LaGuardia spending in 2024 and completion by year-end.
- Delta expects 2024 fuel consumption to increase compared with 2023, broadly aligned with capacity growth, partly offset by fleet efficiency. Management projects a 2024 effective tax rate of 23%–25%.
- Aircraft purchase commitments totaled approximately $20.7 billion, with timing subject to supply-chain, manufacturing and regulatory constraints. Delta entered an agreement for 20 Airbus A350-1000 aircraft, with an option for 20 additional widebody aircraft; deliveries are scheduled to begin in 2026.
- Key exposures include volatile fuel prices, demand and seasonal advance-ticket cash flows, labor and operating costs, investment valuations, and aircraft delivery constraints. Delta reported no material changes to the risk factors or legal proceedings described in its 2023 Form 10-K; it believes current legal matters will not materially adversely affect its financial statements.
Important facts for investors to verify
- Whether demand, premium revenue and capacity growth continue, and whether unit revenue holds up as international capacity expands.
- Whether non-fuel cost growth, fuel-price volatility and refinery performance affect margins in coming quarters.
- Whether planned capital spending, aircraft commitments and debt repayments remain consistent with liquidity and cash-flow expectations.
- How investment valuation changes, including those affecting airline equity holdings, influence reported non-operating results.
- That non-GAAP adjusted measures and the stated $7.4 billion liquidity figure are understood using Delta’s definitions and reconciliations.