Delta cargo revenue down 31% in 2023

Delta Air Lines reported $58 billion in operating revenue for 2023, a 15% increase over the previous year, but revenue from its cargo operations was down 31% year over year. [caption id="attachment_96063" align="alignleft" width="300"] A Delta A350 flies the ATL-JNB route. (Courtesy/Delta Air Lines)[/caption] “Delta carried more travelers this holiday season than any other time in our history,” Chief Executive Ed Bastian said in the company’s earnings call on Jan. 12. THE BIG PICTURE: Delta’s earnings for 2023 and for the fourth quarter specifically, which similarly saw increased overall revenue but decreased cargo revenue, were no surprise. Earnings for the first three quarters of 2023 followed similar trends. Depressed cargo figures throughout 2023 have been attributed to increased capacity and decreased demand , as passenger travel recovered from the pandemic . Delta, often the first of the major carriers to report each quarter, serves as a bellwether for the earnings season. It is likely that other major carriers will also report increased passenger revenue and decreased cargo revenue. BY THE NUMBERS: In line with Delta’s 2023 results, Q4 saw increased revenue overall despite decreased cargo revenue. In Q4: Overall operating revenue was $14.2 billion, up 6% YoY; Operating income was $1.3 billion with an operating margin of 9.3%; Earnings per share were $3.16; and Cargo revenue was $188 million, down 24% YoY. For 2023: Operating income was $5.5 billion with an operating margin of 9.5%; Earnings per share were $7.17; and Cargo revenue was $723 million, down 31% YoY. FLASHBACK: S&P Global Ratings upgraded Delta’s credit to a “BB+” rating, one step below an investment-grade rating, in August. “We are investment-grade rated at Moody’s and we are now only one notch away from investment grade with outlooks improving at both S&P and Fitch during the year,” Chief Financial Officer Dan Janki said in the call. “With this progress, we reinstated our dividend last summer, broadening our appeal to yield-focused investors.” NOTEWORTHY: Delta also announced Jan. 12 that it has placed an order for 20 Airbus 350-1000 aircraft, with options for 20 more, for delivery starting in 2026. “These planes complement our fleet strategy and will offer a world-class customer experience,” Bastian said. “These aircraft are over 20% more fuel-efficient than the 767s that they’ll be replacing.” FUTURE LOOK: Despite seeing increased revenue, Delta lowered its 2024 forecast for earnings per share to $6 to $7; previous forecasts said 2024 earnings per share would top $7. Delta anticipates its Q1 revenue to increase 3% to 6% YoY. “The last two years were a period of intense restoration with unnatural high growth to rebuild our network,” Janki said. “Growth is normalizing and we’ve entered a period of optimization with a focus on restoring our most profitable core hubs and delivering efficiency gains across the enterprise.” THE BOTTOM LINE: Delta expects to see continued growth in the passenger sector and will continue to prioritize passenger over cargo. “As 2024 begins, our enterprise has moved from a period of restoration to optimization,” Bastian said. “Consumer spending is continuing to shift from goods to services, and our customer base is in a healthy financial position with travel remaining a top priority.” MARKET REACTION: Shares of Delta (NYSE: DAL) were down 4.18 % from market open to $38.47 as of market close Jan. 12. Delta shares today were down 2.6 % from market open to $37.47 as of market close. Delta has a market capitalization of $24.1 billion.

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