Delta Reports Record Revenue, Lagging Profits: Uh Oh?

Delta Reports Record Revenue, Lagging Profits: Uh Oh?

116

Delta Air Lines is the world’s most profitable airline, and the airline very much sets the standard when it comes to financial performance in the industry. Delta has just become the first US airline to report its financial results for the second quarter of 2024, and the company’s stock is tumbling following this update.

Delta disappoints investors with financial results

You can always tell how good an airline’s financial results are based on the first bullet point in the press release about the earnings results. For Delta’s Q2 2023 results, that was the following:

Delivered highest quarterly revenue and profitability in Delta’s history

A year later, for Delta’s Q2 2024 results, that’s the following:

Delivered industry-leading operational performance, underpinning trusted brand and customer loyalty

On the plus side, Delta had record revenue of $15.4 billion for the quarter, up 5.4% from last year. However, net income dropped nearly 30% from a year ago, to $1.31 billion. The weaker profitability was due to a combination of increased expenses (up to 10% from last year), plus increased capacity, putting downward pressure on fares.

Delta had strong performance when it came to revenue from premium ticket sales, up 10% from a year ago, while revenue from economy ticket sales rose just 0.3%. Meanwhile revenue from Delta’s Amex partnership was up 9%.

Delta CEO Ed Bastian stated that he thinks the airline is “fairly well insulated” from industry overcapacity, given how much revenue Delta gets from its premium seats, rather than economy seats. Delta’s stock is down around 10% in pre-market hours, following this news.

Delta’s profits fell significantly compared to last year

The industry isn’t headed in a good direction

Delta did as good of a job as an airline can do in the current environment with achieving results. I’m not in any way attempting to suggest that Delta is in trouble, or anything. But I think these results are worth taking note of, because they point to a bigger issue in the industry, which many airline executives try to ignore.

Look, the airline industry is an absolutely impossible business. It’s a highly cyclical industry that requires a ton of capital, has a unionized workforce without the ability to easily renegotiate contracts, and it has endless factors outside of a company’s control. Worst of all, during the best of times, the industry overall is only marginally profitable. There’s a ton of downside, but not a lot of upside.

Fortunately there are some incredibly passionate people who dedicate their lives to the industry. After all, while the airline industry might not be a great business, it is one that enables travel, which is something that so many people enjoy.

The thing is, when you listen to airline CEOs, they basically try to sell you on the dream that the only way the industry is headed is up. They love to talk about how airlines just don’t do a good job telling their stories, and how airline stocks are vastly undervalued, but that’s going to change soon.

I mean, we’ve heard airline CEOs make some pretty unbelievable claims. Perhaps most famous for that is former American CEO Doug Parker, who said that the airline would never lose money again, and that American’s stock at the time was so low that “it defies logic.”

When it comes to profitability, personally I think that several airlines may have peaked in 2023. That’s thanks to a combination of factors, including that global capacity hadn’t yet been restored. However, I can’t help but feel like it’s at least slightly downhill from here:

  • Airlines are dealing with the reality of much higher costs than pre-pandemic, particularly with labor
  • We’ve seen a huge amount of capacity restored within the past year, not just in the United States, but globally, and that puts downward pressure on fares
  • If airlines think there’s overcapacity now, one has to wonder how they’d feel if Boeing weren’t having issues with certifying and delivering new jets, and if Airbus weren’t having issues with its Pratt & Whitney engines

The higher labor costs aren’t going anywhere, and personally I feel strongly that we’re going to continue to see downward pressure on fares. When you combine those factors, I don’t really buy into the Delta and United vision that we’re just going to keep seeing better and better margins. And all of this assumes that there isn’t any major economic downturn, which could have a much more catastrophic impact on the industry.

The airline industry is a tough business!

Bottom line

Delta is the first US airline to report its Q2 2024 financial results. While the airline had record revenue, profitability was down considerably. That’s not surprising, when you consider that the industry is dealing with higher labor costs and lower yields, due to increased capacity.

There’s no end in sight to higher labor costs and/or overcapacity, so I think the margins in the industry will continue to decrease over time. Airline executives often talk about overcapacity being a problem, while also expressing frustration with aircraft manufacturers not being able to reliably deliver planes on schedule. The capacity problem is only going to keep getting worse, in my opinion.

What do you make of Delta’s financial results? Am I the only one who thinks financial results will keep getting worse, rather than batter?

Conversations (116)
The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.
Type your response here.

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Anyone can comment, and your email address will not be published. Register to save your unique username and earn special OMAAT reputation perks!

  1. Jay Guest

    He is going to have a meltdown when UA reports Q2 results next week and outperforms DL on YoY RASM, becoming the new top dog in domestic!!

  2. A220HubandSpoke Diamond

    I do want to say that Tim Dunn is absolutely hilarious.

    He never fails to make me laugh.

  3. simmonad Member

    "Delta Air Lines is the world’s most profitable airline." It's nothing of the sort! DL's operating margin for April to June was 13.6% but Ryanair's (12 months to March 2024) was 18.1%.

    6 more replies
  4. dwondermeant Guest

    Lol downward pressure on fares?
    How much higher can you go?
    I had to get back to my dentist in San Diego from Las Vegas
    Delta 700 dollars in coach/main cabin one way
    plus baggage and seat assignment costs
    Problem solved book Southwest 149 bags fly free
    Don't love them but Delta where my miles are near worthless devaluation after devaluation.Even United makes more sense from a pax perspective
    Done!

  5. Lebonrobert Gold

    Dim Tunn triggered. Nineteen posts so far.

    1 more reply
  6. FlyerDon Guest

    I really admire how well Delta does domestically while operating five different narrow body aircraft types, many of which are over 25 years old. American is operating just two narrow body types and it doesn’t seem to have given them any kind of cost or operational advantages. If Delta is able to reduce their narrow body fleet to just two or three aircraft types they will pull even further ahead of American and United.

    1. Tim Dunn Diamond

      Don
      The most valid fleet comparison is between Delta and United. You are correct that AA hasn't gotten a real cost advantage from its relatively simple fleet but Delta does have a substantial fleet cost advantage over United.
      The reason for DL's advantage is because of Delta Tech Ops which allows it to use its diverse fleet to sell maintenance services to other airlines.
      Other airlines can't do that because their maintenance...

      Don
      The most valid fleet comparison is between Delta and United. You are correct that AA hasn't gotten a real cost advantage from its relatively simple fleet but Delta does have a substantial fleet cost advantage over United.
      The reason for DL's advantage is because of Delta Tech Ops which allows it to use its diverse fleet to sell maintenance services to other airlines.
      Other airlines can't do that because their maintenance is unionized and unions do not offer the flexibility to bring contract mechanics (largely retired Delta mechanics) back to work on a contract and then leave when the job is done.

      and, as much as some people want to argue about the number of orders, Delta has consistently demonstrated it can get the planes it needs to grow where it is appropriate to do so - but they said today that they are moving forward with aircraft retirements because they are comfortable they can add aircraft as they need to - which means other airlines are not going to be able to grow much either.

      As to Steven's comment below, it is clear that I am here to talk about the business of the airline industry and few people can or do accurately discuss it. Ben wrote a story, got it accurate, and after the usual interlopers drop off the scene - as they always do after a lot of friction - the conversation is carried by people that actually do contribute to the discussion - real customers and people that are impartial but understand the business.

      Ben does tee up discussions on other airlines and I hope he does more of what he did today. So far, a handful of people love to show up and crap on discussions about Delta but maybe if Ben posts enough stories, enough of his real valuable readers - not the interlopers - will jump in with real commentary and observations and Ben's site will be a true well-rounded site for airline news of all kinds instead of the aversion that some have to discussing business issues - but which Ben is clearly capable of doing.

  7. Steven E Guest

    This is becoming so tiresome constantly have to read responses from that man about everything DL and all the back and forth arguing - DL seems to be the focus on here A LOT - I’m beginning to wonder why l

  8. Greg Guest

    The heavier reliance on premium upsell from "bleisure" travel makes the carriers more vulnerable to consumer spending and Delta's numbers are reflecting. Theyre also the most exposed to that.

    I'm seeing lower domestic discount first fares (the type people get upsold to) on all the carriers for bookings just weeks away still in the height of summer travel. Cross country in first for around $500 each way, some routes under $400. Didn't see those...

    The heavier reliance on premium upsell from "bleisure" travel makes the carriers more vulnerable to consumer spending and Delta's numbers are reflecting. Theyre also the most exposed to that.

    I'm seeing lower domestic discount first fares (the type people get upsold to) on all the carriers for bookings just weeks away still in the height of summer travel. Cross country in first for around $500 each way, some routes under $400. Didn't see those kinds of fares a couple months ago for relatively close in bookings. They were more $700 range.

    Imagine if all the Boeing capacity had come online - a possible blessing in disguise for all the carriers

    1. Tim Dunn Diamond

      Greg
      when a company serves 150 million plus customers per year, anecdotal experience means nothing for something that is easily quantifiable.

      Delta specifically said that its premium tickets are seeing a double digit increase while coach is flat. United will likely report similar data.

      The inability to increase fares is coming from coach which is why all of the industry analysts recognize that DL and UA are better off than the rest of the...

      Greg
      when a company serves 150 million plus customers per year, anecdotal experience means nothing for something that is easily quantifiable.

      Delta specifically said that its premium tickets are seeing a double digit increase while coach is flat. United will likely report similar data.

      The inability to increase fares is coming from coach which is why all of the industry analysts recognize that DL and UA are better off than the rest of the industry; Delta just simply has less cost increase and more revenue increase activity in the pipeline including from its loyalty program.

      you are right that the manufacturer delays are helping slow the increase in capacity that the industry does not need right now

  9. Terry Guest

    Richard Branson was asked how to become a millionaire & replied, "Start out a billionaire, and buy an airline".

  10. JustinDev Member

    Downwards pressure on fares...
    Really? Not from where I have been searching. If there are downward pressure on fares, I wouldn't like to see what these sky high fares would be otherwise.

  11. BeeZee Member

    Timmy is a busy little bee in this comments section!

    1. A220HubandSpoke Diamond

      Convenient username I must say

  12. ZTravel Diamond

    Just retuned yesterday for 40K miles trip literally around N.A., Europe and Asia and on my way back to the US I flew KLM biz class which allowed me to use the D1 lounge and wow!
    Not only impressed by the lounge itself but the soft service of the staff and attentiveness really is shocking!
    Having just visited Jal First and Biz lounges in Haneda, I’m very pleased with what delta is doing here

    10 more replies
  13. 5 more replies
  14. MaxPower Diamond

    Negative RASM and positive CASM in 2Q and projected negative rasm in 3Q certainly doesn't look good for any airline and Delta certainly isn't alone in that outlook.

    While DL, AA, and UA will likely be fine through all this, the negative rasm for the big carriers makes you want to short NK & B6 (to the extent it's even possible to short those two stocks anymore since they've fallen so low...).

    Almost...

    Negative RASM and positive CASM in 2Q and projected negative rasm in 3Q certainly doesn't look good for any airline and Delta certainly isn't alone in that outlook.

    While DL, AA, and UA will likely be fine through all this, the negative rasm for the big carriers makes you want to short NK & B6 (to the extent it's even possible to short those two stocks anymore since they've fallen so low...).

    Almost seems hard to believe where SAVE's stock was pre-pandemic and after the B6 merger offer.

    5 more replies
  15. Chase Guest

    …And reaching the final loyalty cliff isn’t here yet, when all the rollover metrics finally sunset. I predict once that occurs and Delta’s foolish ‘strategy’ of treating loyal elites poorly becomes evident, revenue will drop as well. Because those former elites will finally be able to divorce from the abusive relationship.

    1 more reply
  16. Jordan Diamond

    The money the people of the USA gives to NASA is 25 billion dollars, yearly.

    The USA would be better of partially privatizing certain parts of US carriers (more subsidies) from that 25 billion dollars.

    1. Blackjack Guest

      US carriers are all private. Not sure how NASA's budget could help unless you're saying we should nationalize one of our carriers.

  17. yoloswag420 Guest

    "Am I the only one who thinks financial results will keep getting worse, rather than batter?"

    I think you mean to say better, although I do love me some cookie dough batter.

    12 more replies
  18. digital_notmad Diamond

    of course it's true that many of us had our suspicions, but it's still deeply unfortunate to see it all out in the open like this. just really, very sad.

  19. Tim Dunn Diamond

    now that the market is open, DAL is down slightly more than AAL and UAL, all of which are down in the 5-9% range.
    All US airlines are down based on Delta's ability to provide insight to the state of the industry.

    Delta was one of several companies that reported financials today. Pepsico and food producer Conagra both had weak revenue. What DAL saw is in line with other consumer companies.
    And,...

    now that the market is open, DAL is down slightly more than AAL and UAL, all of which are down in the 5-9% range.
    All US airlines are down based on Delta's ability to provide insight to the state of the industry.

    Delta was one of several companies that reported financials today. Pepsico and food producer Conagra both had weak revenue. What DAL saw is in line with other consumer companies.
    And, as has been seen for a few years, Delta and other airlines that are generating revenue via premium cabins and also via non-transportation sources are doing better than low cost carriers that have consistently been more impacted by high inflation.

    And again, from a cost standpoint, airlines like American and United that have large open labor contracts will see a higher rate of cost growth as they have to eventually raise flight attendant salaries which will include some sort of retro or signing bonus that will compensate for the multiple salary raises that DL FAs have received and the retro that WN received as part of their new contract.

    Airlines that envision high growth such as WN and UA will find it very hard to grow revenues given the weaker revenue environment esp. for leisure products.

    The airline industry is reaching a plateau, Delta is at the top of the industry and faces less risk in the developing environment than other airlines.

    1 more reply
  20. Julie Guest

    I’m not sure what’s more annoying, Tim’s actual ignorant comments or all his fake aliases trying to tell others how insightful he is.

    3 more replies
  21. FNT Delta Diamond Guest

    Delta's airfares are absurd. Well above the rate of inflation. Business travel still hasn't recovered. I don't know anyone in sales or business development who is flying transcontinental just to service a client. Before the pandemic, I knew people who could use that as an excuse to fly to San Francisco for dinner. I also wonder whether Delta's elites have taken their business elsewhere. It probably took a quarter or two for that to show up.

    1. Delta pilot Guest

      And yet our planes are completely full, which means that customers are willingly paying a premium. None of us pilots know where this “excess” of seats are. Nearly every flight is oversold or depart with very few open seats. Yes some of those are taken up by nonrevs but in general the load factors I’ve personally seen are all well north of 98%.

  22. JetAway Guest

    I find (the real) Tim Dunn's comments extremely insightful and useful. So much so that I would read his blog if he had (or has) one.

    3 more replies
  23. Alonzo Diamond

    Increased costs from.......you guessed it. Labor.

    Lmao, don't let these airlines fool you, they're doing just fine with airfares. People pay more to fly Delta, especially in premium cabins. They're turning these 100% full flights around so quickly, to fly to another destination as soon as they drop off a plane load of people.

  24. Todd Guest

    Sometimes it is actually helpful to look beyond just the big headline. GAAP net income was down 29% from last year but was down 11% when adjusted for the refinery, unrealized gains/losses on investments, and losses on extinguishment of debt (in other words, non-operating items). Operating income was down 9% on both a GAAP and adjusted basis, which shows that a lot of the noise is coming from non-operating items.

  25. Stanley C Diamond

    Tim does obsess a lot over Delta but he does make very insightful and useful comments unlike some other readers here.

  26. MC Guest

    I think Ben hit it on the head. If Delta is not performing to the degree investors anticipated, it’s safe to assume this is an industry dynamic. Considering, Delta is perceived as the benchmark for financial performance, this latest report probably is far better than what the competition will report, even if it didn’t meet Wall Street’s expectations.

  27. tom Guest

    Totally agree with "305". These Tim Dunn comments are no longer entertaining and childish.

  28. 305 Guest

    Another comment for all the fake Tim Dunns to please go away. The jokes are lame, and your obsession over a commenter is way weirder than his obsession with Delta.

    2 more replies
  29. betterbub Diamond

    You guys obsessing over Tim Dunn is honestly a lot more annoying than his comments. At least he adds something to the conversation from his perspective even if it’s a perspective I don’t agree with. Enough with the spam

    1. ImmortalSynn Guest

      A lot of those accounts seem to be just one person with too much time on his/her hands, because they make the exact same syntax/grammatical errors.

  30. Tim Dunn Diamond

    as usual, Ben is more capable of reading and interpreting what is written than most of his readers.

    Yes, Delta's financials rattled investors because costs are high - driven by labor and fuel - and fares are softening.

    Delta is almost always the first airline to report and also one of the first Fortune 500 companies to report so analysts extrapolate out what Delta says not just to other airlines but across the broader economy....

    as usual, Ben is more capable of reading and interpreting what is written than most of his readers.

    Yes, Delta's financials rattled investors because costs are high - driven by labor and fuel - and fares are softening.

    Delta is almost always the first airline to report and also one of the first Fortune 500 companies to report so analysts extrapolate out what Delta says not just to other airlines but across the broader economy. That is why most airline stocks are also down in pre-market trading and airline stocks will likely be down.

    Keep in mind that Delta receives the highest average fares in the industry and is still adding capacity in the 3rd quarter faster than any other US airline in absolute numbers so Delta can discount in order to fill seats. Other airlines such as WN and UA that will try to grow at faster RATES will have an even harder time filling seats esp. after the summer.

    And Delta is getting a 6 cent/gallon benefit from the refinery which means that it is saving $60 million just this quarter compared to what other airlines can get on fuel.
    Delta has no open labor contracts or retro payments to make so airlines that have just recently signed labor contracts or have to do so and pay retro or signing bonuses will see even higher increases in labor costs.

    International performed well as did domestic including Latin America and the Pacific, areas where Delta is committed to growing.

    The fare environment is softening while costs - largely set by Delta - are not going down, as Ben notes.

    Delta is in the driver's seat of an industry where competitors will not produce any better results.

  31. JustinB Diamond

    The Tim jokes are beyond old. I for one appreciate his perspective even if I don’t always agree with it - still one of the most insightful people in the comments

    2 more replies
  32. Parnel Guest

    Oh no! What will Tim do .

  33. khatl Guest

    The biggest costs for airlines are the planes, fuel and people. With sky high fares and similarly sky high demand (3m+ passengers last Sunday), it basically tells me that Delta is being poorly managed, as none of those other costs are particularly out of whack. This should be a golden time for any airline, not least of which is Delta given their premium class performance

    3 more replies
  34. axck Guest

    Real ones know that revenue is actually more important than profits. Explanation incoming.

    2 more replies
  35. Chris Guest

    It’s bedtime in Australia so all I can say is please look after him today, the poor dear. Then again, perhaps he’ll be just fine; I’m sure he can tell us why this is good news because Delta.

    1. Eskimo Guest

      Tim can make an alien invasion a positive for Delta.

      He'll be just fine.

  36. Tim Dunn Guest

    This is fake news. Delta is always and forever the most profitable airline.

    1. DaBluBoi Guest

      I invested all of my life savings into Delta cos "Delta is love, Delta is life"

      (/s)

Featured Comments Most helpful comments ( as chosen by the OMAAT community ).

The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.

Julie Guest

I’m not sure what’s more annoying, Tim’s actual ignorant comments or all his fake aliases trying to tell others how insightful he is.

8
MaxPower Diamond

Sorry. Is this Tim Dunn, ATL100Million, WorldTraveller, Jumbojet, Tom, 305, Erikoj, or someone else typing this? It would be nice if you actually looked at the topic and spoke to it rather than turning everything into a passport plum festival.

7
Plane Jane Guest

Tim's autism?

7
Meet Ben Schlappig, OMAAT Founder
5,163,247 Miles Traveled

32,614,600 Words Written

35,045 Posts Published