Delta Air Lines reported record profits, revenue, and earnings per share in Q4 2024
From Nasdaq: 2025-01-10 18:00:15
Delta Air Lines (NYSE: DAL) held its Q4 2024 earnings call on January 10, 2025, reporting a pre-tax profit of $1.6 billion and earnings per share of $1.85, the largest December quarter profit in the airline’s history. Operationally, Delta achieved industry-leading performance and was recognized for operational excellence, with a return on invested capital of 13%. The airline expects its results to lead the industry across all key measures, with a double-digit operating margin and $5.2 billion in pre-tax income, representing nearly 50% of the industry’s profitability.
In response to the devastating wildfires in Southern California, Delta announced a $1 million donation to the American Red Cross to aid those affected. The airline also expressed condolences for the recent passing of President Carter, highlighting his impact on the airline industry through deregulation. Delta delivered a strong close to the year financially, with a pre-tax profit improvement of over $500 million from the previous year. The airline’s full-year earnings per share of $6.16 exceeded initial guidance, with free cash flow leading the industry at $3.4 billion and a 50% increase in quarterly dividend. S&P recently upgraded Delta’s balance sheet to investment-grade level. Delta Airlines announced a $1.4 billion profit-sharing payout for employees, representing one of the top three payouts in the company’s history. The airline expects to achieve record profitability in 2025 with strong revenue growth and margin expansion. Delta also plans to generate over $4 billion in free cash flow to reduce debt and lower leverage. The company unveiled new digital tools and partnerships, including Delta Concierge and a partnership with YouTube, to enhance the travel experience and deepen customer loyalty. Revenue for the December quarter reached a record $14.4 billion, driven by operational performance and increased demand from leisure and corporate travelers. Total unit revenue grew 0.4% year-over-year, with strong performance in domestic and international markets. Premium, loyalty, and cargo revenue contributed significantly to Delta’s record revenue of $57 billion in 2024, with expectations for continued growth in 2025. Delta is experiencing strong demand and improving industry dynamics, with March quarter revenue expected to be up 7% to 9% higher than last year. Domestic demand is robust, while Trans-Atlantic unit revenue is expected to lead. Latin unit revenue is improving, and the Pacific is leading in overall revenue growth. Delta plans to increase capacity by 3% to 4% in 2025, focusing on premium cabins and core hubs. In 2024, Delta reported record fourth quarter revenue and profit, with earnings of $1.85 per share. The company invested in its people and customers, generating free cash flow of 3.4 billion.
For the March quarter, Delta expects revenue growth of 7% to 9%, an operating margin of 6% to 8%, and earnings of $0.70 to $1 per share. Non-fuel unit cost growth is expected to be up low single digits year over year. The full-year outlook includes earnings per share ahead of the long-term growth target, free cash flow greater than 4 billion, and leverage of two times or less. Delta plans to fund half of its expected capacity growth in 2025 through improved fleet utilization and deployment into high-margin core hubs. Delta is expecting growth in headcount below capacity this year as their workforce gains experience. The completion of generational airport developments in 2025 positions Delta well for the future. They anticipate over 4 billion in free cash flow, a 500 million improvement from 2024, and plan to invest in technology, facilities, and debt paydown. Delta’s long-term financial framework is creating value, with industry-leading returns and progress towards a 15% return on invested capital target. The trans-Atlantic region saw outstanding performance, with strong advance bookings and business travel driving growth. Europe’s appeal as a tourist destination is contributing to this success. Delta Air Lines CEO Edward Bastian discussed the company’s new partnerships at CES and plans for monetizing SkyMiles in the future, focusing on customer loyalty and experience-based platforms. CFO Daniel Janki highlighted efforts to keep CASM low single digits, including investments in people, assets, and customer experience. Delta is focusing on efficiency and growth in core hubs, premium seats, and maintenance supply chain improvements. Technology advancements and industry progress are expected to drive long-term benefits. President Glen Hauenstein noted strong demand in January, with record sales days, despite challenging comps and a unique business environment. Delta Airlines is anticipating a strong year with high demand across all entities. The company is excited about competitive capacity in the trans-Atlantic and expects robust returns for summer travel. Boomers are driving premium sales, with strong demand in both leisure and corporate segments. Corporate travel managers anticipate exceeding or meeting last year’s spend. Despite competitive dynamics in hubs like Boston and challenges in Los Angeles due to wildfires, Delta remains optimistic about its performance. Fuel recapture is expected to happen faster in the current strong market environment. Delta Airlines executives discussed the challenges of recapturing higher fuel costs in a competitive industry. They emphasized the need to improve margins overall, as well as behavioral changes in corporate travel post-COVID. The airline saw a revenue surprise in the fourth quarter driven by late Thanksgiving trends. In Latin America, Delta is transitioning from investment mode to a more mature position. Premium revenue growth continues to outpace main cabin, with potential for main cabin improvement in 2025. The impact of a later Easter on RASM in March and June quarters remains to be seen. Delta Airlines president Glen Hauenstein discusses robust demand in Europe, driven by baby boomers and strong dollar. Premium revenue growth remains steady despite main cabin challenges. Hauenstein emphasizes disconnecting main cabin from premium pricing strategy to optimize revenue. He expects higher loads to drive premium revenues, not necessarily higher yields. Capacity growth in the first quarter estimated at 4.5-5%, with expected reductions in the second quarter. Trans-Atlantic growth slightly above system average. Corporate demand sees 10% growth, with a focus on volume and yield balance.
Analyst questions on pricing algorithm between main cabin and premium, future capacity trends, and trans-Atlantic growth. Hauenstein provides insights on pricing strategy, capacity adjustments, and maintaining balance between unit cost and unit revenues. Delta Airlines remains focused on optimizing margins through strategic scheduling and route adjustments. Corporate demand growth remains strong, with a focus on understanding volume and yield contributions. American Airlines and Southwest Airlines’ corporate growth strategies also discussed in the context of the industry landscape. American Airlines has reported that their market share is at or near record highs every month, with no deterioration in the past year. The growth was primarily driven by traffic earlier in the year and a mix of traffic and yield towards the end of the year. They expect around 40 aircraft deliveries in 2025, with a capex level of $5 billion. The company plans to retire about 30 aircraft in 2025, up from just over 20 in 2024. Maintenance spend is expected to move towards normalized levels with improvements year over year.
In terms of fleet comments, American Airlines expects to retire about 30 aircraft in 2025, up from just over 20 in 2024. They plan to finalize the fleet plan for 2026 in late spring or early summer. Around 40 aircraft deliveries are expected in 2025, with about 12 to 13 being widebodies. Maintenance spend for 2025 is expected to move towards normalized levels, with a gradual improvement year over year. Delta Airlines is monitoring sales in Los Angeles amid wildfires, seeing a decline but not significant impact expected for the quarter. They have alternative ways to receive aircraft deliveries to mitigate potential tariffs. Despite higher fares, robust demand and record sales are reported, with no concerns about inflation fatigue among consumers. Delta remains steadfast in sustainability and DE&I commitments, focusing on efficiency and talent retention. The impact of natural disasters like the LA fires typically results in an uptick in demand as people rebuild, with no long-term impact on the airline expected. Delta Air Lines is recommended by The Motley Fool as they report their second-quarter earnings. The airline company saw a revenue of $7.1 billion, which is a 50% increase compared to last year. Additionally, Delta announced a net income of $652 million for the quarter. Despite challenges in the industry, Delta Air Lines remains optimistic about the future. Nasdaq, Inc. reminds readers that the views expressed in the article are those of the author and not necessarily reflective of the company.
Read more at Nasdaq: Delta Air Lines (DAL) Q4 2024 Earnings Call Transcript