Delta’s cargo revenue falls 15% in Q1

Delta Air Lines reported a record $13.7 billion in operating revenue for the first quarter of 2024, an increase of 8% year over year. However, cargo revenue was down 15% YoY to $178 million. [caption id="attachment_96063" align="alignleft" width="347"] A Delta A350 flies the ATL-JNB route. (Courtesy/Delta Air Lines)[/caption] “2024 is off to a great start and we’re delivering on our commercial priorities to optimize our network, grow higher margin revenue streams and invest in our future,” Delta President Glen Hauenstein said on the April 10 earnings call. THE BIG PICTURE: Cargo revenue remained down, but still shows recovery. Delta’s Q4 2023 cargo revenue wa s $188 million, down 24% YoY, while its full-year 2023 cargo revenue was down 31% YoY to $723 million. 2023 was a challenging year for air cargo, with reduced demand and passenger recovery causing increased cargo capacity. Delta’s Q1 cargo revenues show hints of normalization . BY THE NUMBERS: The lion’s share of Delta’s Q1 revenue came from passenger operations, which recorded a 7% YoY increase in revenue to $11.1 billion. Also in Q1: Operating income was $614 million with an operating margin of 4.5%; Pre-tax income was $122 million with a pre-tax margin of 0.9%; Earnings per share were 6 cents; and Payments on debt and finance lease obligations were $712 million. WHAT THEY’RE SAYING: Delta led the industry in completion factor and on-time performance and operated 26 cancel-free days in Q1, according to the earnings report. “Last summer, we made forward-leaning investments in the operation,” Delta Chief Executive Ed Bastian said on the earnings call. “Since then, our teams have delivered operational performance that is among the best in our history with mainline cancellations down 85%, setting new records for completion factor in both the fourth quarter [of 2023] and the first quarter [of 2024].” STATE OF PLAY: Cargo revenue continues to be constricted due to increased capacity and reduced demand. “Total unit revenue growth improved 3 points sequentially to down 0.7%, including nearly a 1-point headwind from cargo and MRO,” Hauenstein said. FLASHBACK: Moody’s Investors Service and Fitch Ratings changed their outlooks for Delta to positive from stable on Feb. 12 and Jan. 25, respectively. S&P Global Ratings upgraded Delta’s credit to a BB+ rating, one step below an investment-grade rating, in August. “We are currently investment-grade rated at Moody’s and BB+ at both S&P and Fitch, with all agencies now on positive outlook following updates from Fitch and Moody’s during the quarter,” Delta Chief Financial Officer Dan Janki said on the call. Delta ranked 33rd on Air Cargo Next ’s Freight 50 list of top cargo carriers, flying 2.2 billion cargo tonne kilometers in 2022. NOTEWORTHY: Delta took delivery of seven new aircraft in Q1, including the A321neo and A220-300, which are more than 25% more fuel efficient than the aircraft they are replacing, according to the earnings report. The carrier also reported that its fuel efficiency, measured in gallons per 1,000 available seat miles, was 14.2, a 1.9% YoY improvement. This efficiency was driven by “fleet renewal and other cross-divisional sustainability initiatives ,” according to the earnings report. FUTURE LOOK: Delta predicts an operating margin of 14% to 15% for Q2, with total YoY revenue up 5% to 7% and earnings per share between $2.20 and $2.50. The carrier predicts earnings per share between $6 and $7 for full-year 2024 and a free cash flow of $3 billion to $4 billion. Delta also announced that daily service between John F. Kennedy International Airport (JFK) in New York and Ben Gurion International Airport (TLV) in Tel Aviv will resume in June. Delta halted flights to TLV in October 2023 at the start of the Israel-Hamas war. MARKET REACTION: Shares of Delta Air Lines ( NYSE: DAL ) were 3.03% from market open to $47.64 as of market close today. Delta has a market capitalization of $30.6 billion.

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