Delta Could Report First Profitable Q1 in Four Years on Travel Rebound

Delta Air Lines Inc. (DAL), the world’s largest airline by market cap, probably had its first profitable first quarter since 2019 as the rebound in air travel returned plane occupancy to pre-pandemic levels.

Net income is expected to come in at $219 million, or 34 cents per adjusted share, up from an operating loss of $1.23 a share last year, according to estimates from Visible Alpha. Total revenue is expected to reach $12.9 billion, the most-ever in the first quarter and a 38% increase from last year.

Load factor, which shows the percentage of available seats sold, rose more than 8 percentage points from last year to 83%, about in line with the pre-pandemic norm. Delta reports earnings before the market opens Thursday, April 13.

Delta’s earnings are likely to underscore the resilience of a travel rebound that has helped airlines endure a year of record-high inflation relatively unscathed. Airline fares rose 4% in the month of March, the largest increase of any Consumer Price Index category. The price of plane tickets increased 17% year-over-year in March, compared with the overall inflation rate of 5%.

In January, Delta told investors that it expected strong travel demand through the end of the year, but that non-fuel costs would increase by 3% to 4% in the first quarter. In its mid-quarter update to investors, Delta stood by its projections that first-quarter sales could be up to 17% higher. It said then it expected to report adjusted earnings of 15 to 40 cents a share.

CEO Ed Bastian says the airline will be adding more premium seats in its planes this year, striving to tap into a premium travel market that can withstand volatility in fuel costs and travel conditions. The airline will have premium seats on every plane starting this summer, while also expanding its premium cabins for affluent leisure customers. 

Delta’s stock jumped early in the year as investors warmed up to equities that had been pummeled the year before, with airline stocks benefiting from the unleashing of pent-up travel demand. The stock has since given up most of those gains, dropping throughout March after the company announced an agreement with its pilots’ union that resulted in a pay increase of 34% over four years.

The Key Metric

Load factor is a key figure for measuring an airline’s success in the market. The figure represents the share of available seats that are filled. It is calculated by dividing revenue passenger miles, which is the number of passengers multiplied by the number of miles traveled, by available seat miles, derived from multiplying the total number of seats by the number of miles flown.

Since airlines have high fixed costs, they also must keep high load factors. Load factors are released monthly and can help investors get insight into whether an airline is running profitably. Fundamentals like route selection and flight frequency also show whether management is properly using resources to get the highest load factors.