Delta Air Lines today reported financial results for the second quarter 2022 and provided its outlook for the third quarter 2022.  Highlights of the June quarter 2022 results, including both GAAP and adjusted metrics, are on page five and are incorporated here.

“I would like to thank our entire team for their outstanding work during a challenging operating environment for the industry as we work to restore our best-in-class reliability.  Their performance coupled with strong demand drove nearly $2 billion of free cash flow as well as profitability in the first half of the year, and we are accruing profit sharing, marking a great milestone for our people,” said Ed Bastian, Delta’s chief executive officer.  “For the September quarter, we expect an adjusted operating margin of 11 to 13 percent, supporting our outlook for meaningful full year profitability.”

June Quarter 2022 GAAP Financial Results 

• Operating revenue of $13.8 billion
• Operating income of $1.5 billion with operating margin of 11.0 percent
• Earnings per share of $1.15
• Operating cash flow of $2.5 billion
• Total debt and finance lease obligations of $24.8 billion

June Quarter 2022 Adjusted Financial Results 

• Operating revenue of $12.3 billion, 99 percent recovered versus June quarter 2019 on 82 percent capacity restoration
• Operating income of $1.4 billion with operating margin of 11.7 percent, the first quarter of double-digit margin since 2019
• Earnings per share of $1.44
• Free cash flow of $1.6 billion after investing $864 million into the business
• Payments on debt and finance lease obligations of $1.0 billion
• $13.6 billion in liquidity* and adjusted net debt of $19.6 billion

*Includes cash and cash equivalents, short-term investments and undrawn revolving credit facilities

September Quarter Outlook¹

Fuel price guidance is based on prices as of July 8th, including Brent at $107 per barrel, cracks at $41 per barrel and $0.27 per gallon refinery contribution.

June Quarter Revenue Environment and Outlook

“With growing demand across our network in the June quarter, we recaptured higher fuel prices and delivered adjusted revenue recovery of 99 percent with unit revenues up 20.5 percent versus 2019.  We also delivered another record quarter of American Express co-brand remuneration, up 35 percent from the June quarter 2019, reflecting growing brand preference and further diversification of our revenue base,” said Glen Hauenstein, Delta’s president.  “With sustained strength in bookings, we expect September quarter revenue to be up 1 to 5 percent compared to 2019 with total unit revenue growth improving sequentially.”

• Domestic continues to lead recovery with international accelerating: Domestic passenger revenue was 3 percent higher and international passenger revenue was 81 percent recovered compared to the June quarter 2019. Revenue in Latin America and Transatlantic both exceeded 2019 levels in the month of June and the pace of recovery in the Pacific saw meaningful improvement, driven by Korea and Australia re-openings and the easing of restrictions in Japan.
• Business recovery progressing: Domestic corporate sales* for the quarter were ~80 percent recovered versus 2019, up 25 points compared to the March quarter. International corporate sales* for the quarter were ~65 percent recovered versus 2019, up 30 points compared to the March quarter, driven by outsized improvement in Transatlantic. Recent corporate survey results show positive expectations for business travel in the September quarter, including optimism around international travel given the elimination in June of the pre-departure test requirement for flights to the U.S.
• Premium products outperforming Main Cabin: Premium product revenue recovery outpaced Main Cabin across all markets. Premium and other diversified revenue streams, including Loyalty, Cargo and MRO, comprised 54 percent of total revenues.
• Strong American Express remuneration: Received $1.4 billion in the quarter, up 35 percent compared to the June quarter 2019 and on track to surpass $5 billion for the full year. Co-brand spend was up 43 percent and co-brand card acquisitions were up 15 percent compared to the June quarter 2019.
• Cargo records best ever June quarter performance; MRO approaches 2019 levels: Cargo revenue was $272 million, a 46 percent increase compared to the same period in 2019. MRO revenue in the June quarter was $178 million, restored to 85 percent of 2019 levels.

*Corporate sales include tickets sold to corporate contracted customers, including tickets for travel during and beyond the referenced time period

June Quarter Cost Performance and Outlook

“Our June quarter non-fuel unit cost performance of up 22 percent compared to 2019 was impacted by lower capacity, higher selling-related expenses and investments in operational reliability,” said Dan Janki, Delta’s chief financial officer.  “We remain confident in our ability to meaningfully improve our unit costs as we fully scale the network and return our operations to Delta’s high standards. In the near-term, as we prioritize restoring reliability, our full year non-fuel unit cost will remain higher than our previous plan by approximately 8 points on 5 points less capacity.”

• Operating expense of $12.3 billion and total adjusted operating expense of $10.9 billion in the June quarter, both increased 21 percent sequentially
• Adjusted non-fuel costs of $7.5 billion were up 10 percent sequentially, primarily driven by higher capacity
• Compared to the June quarter 2019, adjusted non-fuel CASM was 22 percent higher on 18 percent less capacity
• Adjusted fuel price of $3.82 per gallon was up 37 percent sequentially. Compared to the June quarter 2019, market prices were up 94 percent
• Refinery operating income of $269 million resulted in a 31¢ per gallon benefit to our adjusted fuel price per gallon
• Fuel efficiency, defined as gallons per 1,000 ASMs, was 14.6, a 4.2 percent improvement versus 2019

June Quarter Balance Sheet, Cash and Liquidity

“In the June quarter, we repaid $1 billion of gross debt after delivering strong profitability and generating free cash flow ahead of our expectations,” Janki said.  “We remain committed to achieving investment-grade metrics and a return on invested capital in the mid-teens over the next 3 years.”

• Adjusted net debt of $19.6 billion; Weighted average interest rate of 4.3 percent with 84 percent fixed rate debt and 16 percent variable rate debt
• Payments on debt and finance lease obligations of $1.0 billion, bringing the first half total to $2.4 billion
• Free cash flow of $1.6 billion with operating cash flow of $2.5 billion and gross capital expenditures of $864 million
• Air Traffic Liability ended June at $9.9 billion, up $805 million compared to March
• Liquidity of $13.6 billion, including $2.8 billion in undrawn revolver capacity

Other June Quarter Highlights

Operational Reliability

• Took decisive action to improve resilience and restore operational reliability for our customers and employees, including schedule adjustments for the remainder of the year, implementation of earlier boarding procedures and addition of operational buffers
• July performance is off to a good start, with an average month-to-date completion factor of 99.2 percent and 84 percent of flights arriving within 14 minutes of scheduled arrival time
• Updated airport procedures, including earlier domestic boarding and schedule modifications at the company’s largest hubs to help drive more on-time departures and successful connections
• Reactivated Peach Corps, providing employees from the corporate offices the opportunity to step away from daily work routines to assist frontline colleagues while supporting Delta’s operation and customers

Culture and People

• To reward Delta people for their dedication and excellence, implemented a 4 percent base pay increase for eligible scale and merit employees globally on May 1
• Recorded a profit-sharing accrual, which is expected to pay out to Delta employees in February 2023 to recognize their commitment to serving our people, customers and communities
• Introduced industry-only boarding premium pay for flight attendants, marking continued investment in our operational performance
• Recognized as the No. 1 corporate blood drive sponsor with the American Red Cross for the fifth consecutive year
• Resumed The Delta Air Lines Foundation Matching Gifts to Education program, matching Delta employee and retiree donations to accredited, eligible educational institutions

Customer Experience and Loyalty

• Welcomed record number of new SkyMiles and American Express co-brand cardholders to our programs
• Celebrated the openings of Delta’s Terminal 3 at LAX in April followed by Terminal C at LGA in June, featuring the company’s two largest Delta Sky Clubs in the system, part of Delta’s $12 billion investment in multi-year transformation projects at airport hubs across the country
• In partnership with American Express, launched a first-of-its-kind, limited-edition Reserve credit card made with airplane metal of a retired Boeing 747
• Welcomed the first A321neo into service while taking delivery of two additional A321neos, one A220-300, one A330-900 and five gently used 737-900ERs
• Enhanced premium offering with new domestic First Class seat on the A321neo, with larger, improved privacy space, more stowage for personal items and enhanced memory-foam seat cushions in all cabins
• In partnership with Misapplied Sciences, launched PARALLEL REALITY™ beta experience at DTW, a groundbreaking technology allowing customers to simultaneously see personalized content tailored to their unique journey on a single digital screen
• As part of Delta’s commitment to create a values-led experience, added onboard snack and beverage options from small businesses, global suppliers, and woman- and LGBTQ+-led brands
• Introduced new in-flight entertainment from MasterClass, a streaming platform offering exclusive access to select classes, alongside hit movies, bingeable TV shows and curated audio playlists

Environmental, Social and Governance

• Published our 2021 Environmental, Social and Governance (ESG) Report, sharing the latest data and insight into the company’s efforts to advance its purpose of connecting people with opportunity while expanding the understanding of the planet and the people within it
• Leveraged existing infrastructure to accept a batch of sustainable aviation fuel for a Delta flight from New York’s LGA and support the scaling of lower carbon intensity fuels
• Participated in the SkyTeam Alliance’s Sustainable Flight Challenge, an initiative where partner airlines share learnings and innovations with the common goal of reducing the industry’s carbon footprint
• Launched new skills-first career development program establishing a long-term goal of filling 25 percent of corporate management roles with talent in frontline roles and removing career barriers of four-year degrees, supporting economic equity through access to higher-earning jobs across the company
• Joined forces with the Responsible Business Initiative for Justice (RBIJ) to launch Unlock Potential, a program that helps drive economic and social mobility for young people disconnected from education or employment, to create meaningful career opportunities for at-risk young adults

June Quarter Results

June quarter results have been adjusted primarily for the unrealized losses on investments, loss on extinguishment of debt and third-party refinery sales as described in the reconciliations in Note A.

Delta Air Lines aircraft slide show (Airbus):