Categories Analysis, Industrials

Delta Air Lines (DAL) sees a favorable backdrop for air travel in 2023

For the first quarter of 2023, Delta expects total adjusted revenue to be up 14-17% from the same period in 2019

Shares of Delta Air Lines Inc. (NYSE: DAL) were down over 3% on Friday despite the company beating expectations on both revenue and earnings for the fourth quarter of 2022. The stock was hurt by a lower-than-expected earnings outlook for the first quarter of 2023. The stock has gained 15% year-to-date.

Quarterly performance

For the fourth quarter of 2022, Delta generated operating revenue of $13.4 billion on a reported basis, which was up 17% from the same period in 2019. Adjusted operating revenue was $12.2 billion, up 8% from Q4 2019. The top line beat market estimates. The company delivered adjusted EPS of $1.48, which was down 13% from Q4 2019 but ahead of the consensus target.


Delta saw strong demand through the fourth quarter which drove domestic passenger revenue up 7% from the same period in 2019. International passenger revenue rose 5% over the 2019 quarter. In Q4, domestic corporate sales, which include tickets sold to corporate contracted customers, were 80% recovered to 2019 levels. The company stated that, as per a recent corporate survey, 96% of companies expect their travel to stay the same or increase sequentially in the first quarter.

During the fourth quarter, total revenue per available seat mile (TRASM) increased 29% from the 2019 quarter. Passenger revenue per available seat mile (PRASM) was up 17%. Passenger load factor was 85%, down 1 point from 2019. Capacity was down 9%. Non-fuel cost per available seat mile (CASM) was 13% higher than the 2019 period. Average fuel price per gallon was $3.28.

Moving into 2023, Delta sees a favorable industry backdrop for air travel. The momentum seen in the fourth quarter has continued into the new fiscal year as demand trends remain strong. The company believes it will be able to finish rebuilding its network this year and drive more scale bringing its non-fuel unit costs down by 2-4% year-over-year. Average fuel price per gallon is expected to range between $3.00-3.20 in FY2023.


For the first quarter of 2023, Delta expects total adjusted revenue to be up 14-17% from the same period in 2019. Operating margin is expected to be 4-6%. The company estimates Q1 EPS to range between $0.15-0.40, which is much lower than the consensus target of $0.55.

For FY2023, Delta expects total revenue to increase 15-20% year-over-year while operating margin is expected to be 10-12%. EPS is estimated to range between $5-6 for the year.

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