Despite Survey Optimism, Delta Projects Steady Q1 Corp. Demand
About 96 percent of Delta Air Lines' travel manager customers in a recent survey said they expect their organizations' first-quarter travel volume will hold or increase from fourth-quarter 2022 levels, but the carrier nevertheless expects Q1 corporate revenues to...
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About 96 percent of Delta Air Lines' travel manager customers in a recent survey said they expect their organizations' first-quarter travel volume will hold or increase from fourth-quarter 2022 levels, but the carrier nevertheless expects Q1 corporate revenues to remain steady at about 80 percent of 2019 levels for both domestic and international segments, Delta president Glen Hauenstein said during a Friday earnings call.
"We are not counting [the survey results] in our current revenue forecast because sometimes they don't come to fruition," Hauenstein said. "But there is a sense of optimism with pent-up demand for business travel that we think could potentially offset any weakness in the general economy."
Companies' struggle to fully reopen and return employees to the office in person is related to that muted forecast, Delta CEO Ed Bastian said.
"As companies return and employees return to office, we will see a step up in more normal trends, including business travel," he said. "A lot of our accounts we serve are consultancies, legal, accounting, and it's tough for them to get on the road if offices are not open of their clients and customers. But as we progress over the course of the year, more and more you'll see business being done like it used to be done."
Still, Delta in the past week to 10 days witnessed its highest post-pandemic demand in corporate bookings, Hauenstein added. "We see a very strong post-holiday demand set."
Premium Demand Remains Strong
As Delta increases the number of premium seats on its flights, basic economy continues to take a back seat to the forward cabins.
The company expanded its Delta Premium Select rollout throughout last year and will continue in 2023. Delta plans to offer the premium economy cabin in about 84 percent of its international widebody fleet by summer, Hauenstein said. Basic economy made up less than 5 percent of 2022 revenue, which was half of its level in 2019, he added. Conversely, a record 55 percent of revenue was generated by premium products and diverse revenue streams, he added, "and we are confident to exceed 60 percent by 2024."
Response to FAA Outage
Delta was the first U.S. carrier to report 2022 fourth-quarter and full-year earnings, and it also addressed this week's Federal Aviation Administration outage.
"It's very clear there has to be a call to action among political leaders to fund and provide resources the FAA needs to do the job," Bastian said. "We've long talked about the need for modernization of our air traffic control systems. This is a crystal-clear example of the challenge the FAA is faced with when you have aging systems that are not as resilient as they need to be. You have tools and technology that are somewhat outdated and staffing levels not where they need to be. The FAA is doing the best they can, but we need to stand behind them and we need to take them off the year-by-year funding that seems to be caught up in political negotiations and realize the important of having a strong aviation infrastructure and the importance of that to our economy as well as to our public."
Q4 and Full-Year 2022 Metrics
Delta reported fourth-quarter 2022 net income of $828 million on revenue of $13.44 billion, down from the $1.1 billion income reported in Q4 2019, yet up from the $11.44 billion revenue reported during that period. Fourth-quarter passenger revenue was $10.89 billion, up 6.3 percent from the $10.25 billion reported three years ago.
Full-year net income was $1.32 billion on revenue of $50.58 billion. Net income was down from the $4.77 billion reported in 2019, while revenue increased from $47 billion. 2022 passenger revenue was $40.22 billion, down about 4.9 percent from 2019.
Fourth-quarter average fuel was $3.20 per gallon, with the full-year average price at $3.36 per gallon. Q4 2019 quarterly and full-year fuel prices were $2.01 and $2.02, respectively.
Delta forecast first-quarter 2023 revenue to be between 14 percent and 17 percent higher than the same quarter in 2019 on capacity that is 1 percent lower, with full-year 2023 revenue expected to be 15 percent to 20 percent higher year over year.
