Delta Air Lines has today revealed its full year financial results for 2024 (including some substantial profit sharing for employees), and has issued its forecast for 2025. The company seems to believe that 2025 will be its best year yet…
Delta aiming for record 2025, with $6 billion profit
Before we talk about 2025, let’s briefly recap Delta’s performance in 2024. The airline had record revenue in 2024, but not quite record margins. In terms of full year, adjusted 2024 financial results:
- Delta had operating revenue of $57.0 billion; that’s 4.3% higher than in 2023
- Delta had operating income of $6.0 billion, with an operating margin of 10.6%; in 2023, Delta had operating income of $6.3 billion, with an operating margin of 11.6%
- Delta had pre-tax income of $5.2 billion, with a pre-tax margin of 9.1%; in 2023, Delta had pre-tax income of $5.2 billion, with a pre-tax margin of 9.5%
- Delta had earnings per share of $6.16; in 2023, Delta had earnings per share of $6.25
As you can see, Delta had record revenue for the year, though margins weren’t quite as good as they were in the previous year. Perhaps what’s most interesting is what Delta is predicting for 2025. The airline expects this year will be the strongest in the carrier’s history, with a pre-tax income greater than $6 billion, and earnings per share greater than $7.35.
For the first quarter of 2025, Delta is expecting 7-9% revenue growth compared to 2024, which is substantial. Delta believes this strength will come from “consumers increasingly seeking the premium products and experiences that Delta provides.”
Here’s what Delta CEO Ed Bastian had to say:
“2024 was a great year for Delta with our results reflecting differentiation from the industry and increased durability. Our people finished the year strong, delivering industry-leading operational and financial performance. Sharing Delta’s success is core to our culture, and I’m excited to recognize our people’s outstanding efforts with $1.4 billion in profit sharing payments next month.”
“As we move into 2025, we expect strong demand for travel to continue, with consumers increasingly seeking the premium products and experiences that Delta provides. Our differentiated strategy and best-in-class operations, combined with demand strength and an increasingly constructive industry backdrop, position us to deliver the best financial year in Delta’s 100-year history, with pre-tax income greater than $6 billion, earnings per share greater than $7.35 and free cash flow of more than $4 billion.”
Delta’s goals for 2025 don’t seem unrealistic, but…
I have a few thoughts on Delta expecting 2025 to be a blockbuster year for the airline, and the best in the company’s history.
If 2025 goes off without a hitch, then I think Delta’s goals are realistic. The problem, as I see it, is that the airline industry is just about the most volatile industry out there, and there’s so much that can go wrong. From the economy weakening (including the stock market going down), to unrest or terrorism in regions that are important to the airline, to technological meltdowns, there’s a lot that can impact the performance of an airline.
I don’t envy the job of being an airline executive, and I realize that they have to make predictions, and that investors expect updates. But I’d argue that there’s no case to be made for investing in airlines long term, short of taking advantage of the huge swings in the industry.
It’s also why airline CEOs seem to often suffer from amnesia. Like, in 2017, American’s former CEO, Doug Parker, said the airline would never lose money again. Well, it didn’t take long for him to be proven wrong. And the irony is that this is the same guy who was leading an airline during 9/11, and during subsequent financial downturns.
Next, I think it’s going to be interesting to see how the battle between Delta and United continues to evolve. There’s simply no denying that United has been on a massive upward trajectory, while Delta has sort of been the airline to beat, and has been maintaining the status quo. United certainly has more momentum than Delta does, but that’s also because Delta is starting from a better position.
Delta’s new buzzwords seem to be “durability” and “differentiated,” as we’ve now seen these used by the airline several times. What’s the airline getting at, exactly?
If you hear United executives talk, they’ll often mention Delta by name, and say positive things. Meanwhile Delta executives rarely even acknowledge United’s existence, even when they’re trying to suggest that United is their only competitor.
Am I the only one who feels like the frequent use of those two words in recent times is sort of a United defense mechanism of sorts?
- I feel like “differentiated” is intended to somehow shade United, and put it into a lower category; however, it’s not clear to me how exactly Delta is differentiated from United, for these purposes
- “Durability” is a clear shot at United, basically suggesting that while United might be rising, Delta is already at the top, and will maintain its position
Bottom line
Delta expects 2025 to be a record year, with the airline anticipating a profit of at least $6 billion. The year is off to a good start, as Delta is seeing a revenue increase of 7-9% for the first quarter, compared to 2024.
While Delta may achieve its goals, the reality is that the airline industry is so volatile, and I think these projections assume a best case scenario of all kinds of macroeconomic factors. So we’ll see how that plays out. Equally interesting will be to see how the competition between Delta and United evolves, given how United is increasingly catching up to Delta.
What do you make of Delta’s projections for financial performance in 2025?
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