Categories Analysis, Industrials

Delta Air Lines (DAL) expects to see improvement in business travel over the coming months

For the third quarter of 2022, Delta expects total revenue to increase 1-5% compared to the third quarter of 2019

Shares of Delta Air Lines Inc. (NYSE: DAL) were down 4% on Wednesday after the company reported mixed results for the second quarter of 2022. While revenues beat expectations, earnings fell short of projections. The stock has dropped 24% year-to-date. Here are a few notable points from the earnings report:

Mixed results

Delta generated operating revenue of $13.8 billion for Q2 2022, which was up 10% from the same period in 2019 and ahead of market projections. On an adjusted basis, operating revenue recovered 99% from the Q2 2019 levels. Adjusted EPS dropped 39% to $1.44 compared to Q2 2019, missing expectations.   

Operating performance and trends

In Q2 2022, capacity was down 18% from the same period in 2019. Passenger load factor dipped slightly to 87%. Total revenue per available seat miles (TRASM) increased 34% to 23.47 cents while cost per available seat mile (CASM) rose 44% to 20.89 cents. Non-fuel unit cost was up 22% to 12.76 cents. Average fuel price per gallon increased 80% to $3.74 and total fuel expense rose 41% to $3.2 billion.

Domestic passenger revenue was up 3% compared to Q2 2019 while international passenger revenue saw an 81% recovery versus the same period. However, total passenger revenue for the quarter dropped 4% to $10.9 billion compared to the 2019 period.

Delta continued to see recovery in business travel during Q2. Domestic corporate sales were around 80% recovered versus 2019 while international corporate sales were around 65% recovered. The international recovery was driven by outsized improvement in Transatlantic. Results from a recent corporate survey indicate a bullish outlook for business travel in the third quarter along with optimism around international travel.

Cargo revenue rose 46% to $272 million compared to Q2 2019. Delta’s co-branded credit card with American Express yielded $1.4 billion in remuneration for the quarter, up 35% compared to the same period in 2019, and on track to exceed $5 billion for the full year.

 Outlook

For the third quarter of 2022, Delta expects total revenue to increase 1-5% compared to the third quarter of 2019. Capacity is expected to be down 15-17% from Q3 2019. Operating margin is expected to range between 11-13% while CASM-Ex is projected to be up around 22% versus Q3 2019.

Click here to access the full transcripts of the latest earnings conference calls

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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