Delta Air Lines (DAL) Annotations

You cannot, if you're on the lower end of the industry's food chain, continue to post losses, particularly given the health of the demand set we've all seen over these last couple of years. So I don't know what form that will take, but I guarantee you, and you're already starting to see, capacity is usually the first thing that you -- lever you have available, but there will be more levers available as well. The health of the industry broadly is in pretty good shape.

. Combined with our outlook for top line growth, we expect an operating margin of 11% to 13% with earnings of $1.70 to $2 per share. Fuel prices are expected to be $2.60 to $2.80 per gallon, including an approximately $0.05 contribution from the refinery. Refinery margins have normalized, and profits are expected to be $60 million lower compared to the third quarter of last year. Nonfuel unit costs are expected to be 1% to 2% higher than last year on 5% to 6% capacity growth. With normalized growth and consistency in delivering a great operation, we are making progress in driving efficiency and growing into our resources. On maintenance, the investment in fleet health we made since last summer are paying off, with maintenance cancellations in the first half down 77% over prior years.

As our international network and core hubs approach full restoration and we return to a more normal cadence of retiring aircraft, Delta's capacity growth decelerates into the second half of the year. For the September quarter, we expect capacity growth of 5% to 6% and revenue growth of 2% to 4%. Total unit revenue is expected to sequentially improve each month. In domestic, we expect an inflection to positive unit revenue growth in the month of September.

So we've really only been in an oversupply situation for a couple of months here, and the industry has already reacted. And I think that's very different than it was years ago where it would stay for prolonged periods of time.

Nonfuel CASM was 1.5% above last year and ahead of guidance. Fuel prices averaged $2.76 per gallon, $0.16 higher than the midpoint of our guidance range. The refinery provided a $0.05 benefit generating a profit of $49 million. This was down $173 million from last year on more normalized refining margins. Fuel efficiency was 1.9% better than last year, benefiting from the continued renewal of our fleet and running a strong operation.

Premium revenue was up 10% over prior year, and we have runway ahead as we continue adding more premium seats to our

Okay. And then maybe one on cost, just to sum it up, Q1 CASM performance was really good, Ed, and you talked about completion factors and just operations helping that. So the Q2 guide seems a bit more normalized, putting you guys at 2% cost growth. So is it just fair to think about that run rate in the context of the year with a low single-digit guide? And what are the moving pieces as we think about headcount, maintenance costs and any other noise you've highlighted throughout the year? Daniel Janki Yes. I think the 2% is in line with the low single digit. I think when you think about the variables inside of that run -- it starts with running a great operation. When you run a great operation that sets the foundation. You get those frictional costs out, and it really allows the operators, and you're seeing it in 2 quarters in a row to have the confidence and really [indiscernible] continue to drive not only better improvement in the operation, but also get after those efficiencies. And as you do that, we said that we're carrying headcount higher than historical for what we ran in 2019, about 10%, and we'll grow into that, and that drives the efficiency associated with that and no change to maintenance. Maintenance is as we expected. But we'll continue to manage the supply chain. It's going to be the one that is -- has the largest constraint still associated with it as we execute through the year.

So premium revenue was up 10% in the quarter, main Cabin was up 4%. What can you tell us about the constitution of that 4%? For example, what's the trend with basic economy? What percent of main cabin passengers are SkyMiles members compared to the premium cabins, that sort of thing? I'm just trying to understand where the 4% is coming from. Are those new customers? Are you taking share from discounters? That sort of thing. Glen W. Hauenstein I think in the quarter, we ran a record domestic load factor in the first quarter. So what I believe drove that was the incremental traffic that we took over historical levels. So pretty excited about doing that in the first quarter. As you know, the first quarter is the most challenging in terms of loads. And for us to come through that quarter with the premiums that we took, I think, really is a testament to the strength of our brand. And of course, as we get through the year, there'll be less and less discounted seats available as you get towards peak. But generally, we're most open in 1Q

But as the fleet continues to evolve and we continue to put more premium seats in the mix, we believe that is one of the key drivers for us to continue to accelerate our relative performance to our industry peers.

Well, generally, the Olympics are not good for airline revenues. And this year, I think, is no exception to that. So while we see a very favorable backdrop for Europe in its totality, there are some challenges for Paris as generally business travel ceases to and from the local markets as the Olympics approach. So I wouldn't say that, that's going to be a windfall. It's actually going to be a bit of a headwind for us in the numbers we've shared with you.

Nonfuel unit costs are expected to be approximately 2% higher than last year, consistent with our full year outlook of low single digit. G

During the quarter, we repaid $700 million of debt, including $400 million of scheduled maturities and $300 million of additional debt initiatives. We expect to repay at least $4 billion of debt this year and continue to be opportunistic in accelerating debt reduction. 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.

For the June quarter, we expect revenue growth of 5% to 7% on capacity growth of 6% to 7% with unit revenues flat to down 2% from last year's very strong performance. Similar to the March quarter, 2Q faces a headwind from the normalization of travel credits.

ollowing the refresh co-brand benefits, we saw card applications reach new records as we are seeing the highest premium acquisition mix in our program's history.

Total loyalty revenue grew 12% on continued strength in the American Express co-brand portfolio with record quarterly remuneration of $1.7 billion.

Managed corporate travel sales grew 14% over the prior year with technology, consumer services and financial services leading that momentum

this may be the most constructive backdrop that I've seen in my airline career.

Turning to our outlook with strong first quarter performance and visibility into the strength of summer travel demand, we remain confident in our full year guidance for earnings of $6 to $7 per share, free cash flow of $3 billion to $4 billion and leverage of 2.5x., the 3 main guideposts that we shared with you in January. For the June quarter, we expect to deliver the highest quarterly revenue in our history of mid-teens operating margin and earnings of $2.20 to $2.50 per share.

% higher and a new record for first quarter. Free cash flow was $1.4 billion, and we delivered a return on invested capital of nearly 14%, putting Delta's returns in the top half of the S&P 500.

Second, growing revenue diversification through high-margin sources remains an important differentiator for Delta. We have runway ahead as we continue adding more premium seats to our aircraft further improve our retail capabilities and expand loyalty revenues and travel adjacent services. We expect American Express remuneration to grow 10% over 2023 levels.