Delta Air Lines Inc (DAL) Q1 2025 Earnings Call Highlights: Navigating Growth Amidst Economic ...

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Thu, Apr 10, 2025, 1:01 AM 4 min read

Pre-Tax Earnings: $382 million or $0.46 per share, flat compared to last year.
Revenue: $13 billion, a 3.3% increase from the previous year.
Operating Margin: Approximately 5% for the March quarter.
Free Cash Flow: $1.3 billion generated during the quarter.
Return on Invested Capital: Double-digit return reported.
Profit Sharing Payout: $1.4 billion distributed to employees.
American Express Remuneration: Grew 13% to $2 billion.
Cargo Revenue: Increased 17% year over year.
International Revenue Growth: 7% increase, with specific growth in Transatlantic (5%) and Pacific (16%).
Fuel Prices: $2.45 per gallon, slightly higher than initial expectations.
Debt Repayment: $530 million repaid, with gross leverage at 2.6 times.
Credit Rating Upgrade: Moody's upgraded Delta's rating, marking the third upgrade in eight months.
June Quarter Outlook: Expected operating margin of 11% to 14% and earnings of $1.70 to $2.30 per share.
Net Aircraft Additions: Expected to be less than 1% for the year.
Debt Repayment Target: At least $3 billion for the year.

Warning! GuruFocus has detected 4 Warning Sign with DAL.

Release Date: April 09, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Delta Air Lines Inc (NYSE:DAL) reported a record revenue for the March quarter, with a 3.3% increase compared to the previous year.
The company achieved a pre-tax income of $382 million and delivered free cash flow of $1.3 billion.
Delta Air Lines Inc (NYSE:DAL) maintained strong operational performance, leading in on-time performance and system completion factor among network peers.
The company celebrated a $1.4 billion profit-sharing payout to employees, recognizing their contributions to 2024's performance.
Delta Air Lines Inc (NYSE:DAL) secured a 10-year agreement with UPS for its maintenance, repair, and overhaul business, supporting long-term revenue diversification.

Negative Points

Delta Air Lines Inc (NYSE:DAL) faced a challenging macro environment, with demand softness in the domestic main cabin and both consumer and corporate travel.
The company experienced a decline in unit revenues by 1% during the March quarter.
There is broad economic uncertainty around global trade, leading to stalled growth and impacting domestic demand.
Delta Air Lines Inc (NYSE:DAL) is not providing an updated full-year outlook due to macroeconomic uncertainties.
The company is reducing expected capacity growth in the second half of the year to align supply with demand, reflecting a cautious approach to market conditions.

Q & A Highlights

Q: Can you provide context on the high and low end of the second quarter guidance, especially regarding the price-sensitive US domestic market and its potential impact on international and premium segments? A: Glen Hauenstein, President, explained that while there is concern about the domestic market's weakness affecting international and premium segments, they have not yet seen this impact. The affluent cohort's wealth remains significantly higher than in 2019, and strong cash sales continue, particularly for long-haul travel. Delta is closely monitoring demand trends.

Q: How are the capacity cuts planned for the second half of the year, and what regions or fleet types will be most affected? A: Glen Hauenstein stated that capacity cuts will begin in August, focusing on domestic main cabin and off-peak times, particularly in the Southeast where schools return earlier. Older aircraft retirements will be accelerated, targeting high recapture and improved profitability.

Q: In a recessionary environment, how do different demand cohorts perform, particularly corporate, premium, main cabin, and international? A: Glen Hauenstein noted that premium demand has been more resilient than main cabin demand. The premium segment is larger than ever, and Delta has expanded ways for customers to access premium cabins, which has helped maintain demand even in a downturn.

Q: How is Delta managing costs in light of reduced capacity growth, and what areas are being targeted for cost reductions? A: Daniel Janki, CFO, explained that Delta is focusing on direct flying costs, maintenance cycles, and aligning labor hours with new volume levels. They are also aggressively managing their supplier base and discretionary spending to protect margins and cash flow.

Q: What is Delta's stance on paying tariffs on new aircraft deliveries, and how is this affecting discussions with Airbus? A: Edward Bastian, CEO, stated that Delta will not pay tariffs on aircraft deliveries. They are working closely with Airbus to address this issue, emphasizing that the aerospace industry significantly benefits the US economy through exports, and they hope for a resolution through trade discussions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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