- Full year 2019 pre-tax income of $6.2 billion and earnings per diluted share of $7.30, a nearly 30% increase over prior year
- Record $1.6 billion profit sharing for Delta's 90,000 employees
- Full year 2019 operating cash flow of $8.4 billion and $4.2 billion in free cash flow
Delta Air Lines today reported financial results for the December quarter and full year 2019 and provided its outlook for the March quarter 2020. Highlights of the December quarter and full year 2019 results, including both GAAP and adjusted metrics, are on page four and are incorporated here.
December Quarter Financial Highlights
- Adjusted earnings per share of $1.70, a 31% increase year over year; above guidance of $1.20 to $1.50 on stronger revenue, lower fuel and a nine-cent net gain related to the unwinding of the GOL relationship
- Total revenue grew to $11.4 billion, up 7% over prior year when prior year period is adjusted for sale of DAL Global Services (DGS)
- Total unit revenue (TRASM), adjusted, increased 2.4%, exceeding expectations on strong holiday travel demand
- Non-fuel operating expense on a unit basis (CASM-Ex) up 4.4% compared to the prior year period, in line with the company's expectations of 4% to 5%
Full Year Financial Highlights
- Adjusted earnings per share of $7.31, a 30% increase year over year
- Total revenue increased to a record $47 billion, up 7.5% when prior year period is adjusted for third-party refinery sales and the sale of DGS
- Total expense increased 3.9% with CASM-Ex up 2%, in line with the company's guidance and long-term cost targets
- Delta's 90,000 employees will share a record $1.6 billion profit sharing payout on Feb. 14
- Generated $8.4 billion of operating cash flow and $4.2 billion of free cash flow
- Returned $3 billion to shareholders through dividends and share repurchases
“2019 was a truly outstanding year on all fronts – the best in Delta’s history operationally, financially and for our customers. Our people, and their commitment to bringing best-in-class travel experiences to our 200 million customers, are the foundation for our success. I’m pleased to recognize their outstanding performance with a record $1.6 billion in profit sharing for 2019,” said Ed Bastian, Delta’s chief executive officer. “As we enter 2020, demand for travel is healthy and our brand preference is growing, positioning Delta to deliver another year of strong results, including earnings per share of $6.75 to $7.75.”
For the full year, operating revenue grew to nearly $47 billion, up 7.5% when prior year period is adjusted for third-party refinery sales and the sale of DGS. Premium product ticket revenue increased 9% along with strong double-digit percentage increases from loyalty and third-party maintenance revenue.
Delta’s operating revenue of $11.4 billion for the December quarter improved 7.2% or $768 million over the prior year (adjusted for the sale of DGS). This was driven by a 9% increase in premium product ticket revenue, an 18% increase in loyalty revenue and a 31% increase in third-party maintenance revenue, which was partially offset by 13% lower cargo revenue.
December quarter passenger revenue by geographic region:
- Domestic revenue grew 7.7% in the quarter on 1.6% higher passenger unit revenue (PRASM) and 6% higher capacity. Domestic premium product revenue grew 11% and corporate revenue grew 6%, driven by strength in business and leisure demand through the holiday period. Revenue and margin improved in all domestic hubs with revenue up 10% in coastal hubs and 6% in core hubs.
- Atlantic revenue grew 0.8% in the quarter on 2.4% higher capacity and a 1.6% decline in PRASM, driven almost entirely by foreign exchange rates.
- Latin revenue grew 6.7% on a 6.3% increase in unit revenue and 0.4% higher capacity. This revenue improvement was driven by continued double-digit unit revenue growth in Brazil and Mexico.
- Pacific revenue was down 0.5% versus prior year on a 4.4% decline in unit revenue primarily due to continued softness in China. This was a 3.2 point improvement versus the September quarter on improved trends in Japan and strong Delta Premium Select performance.
"Our industry-leading operational performance and the unmatched service our people provide are the reasons why more customers than ever are choosing to fly Delta. Investments in reliability, product and service, airports and technology are reshaping customer perception and driving record satisfaction scores and increasing brand preference.” said Glen Hauenstein, Delta’s president. "We delivered $47 billion in revenue in 2019, a more than $3 billion increase when adjusted over prior year, while sustaining a revenue premium to the industry of more than 110%. Demand trends remain healthy and we expect momentum to continue in 2020, with revenue growth of 5% to 7% in the March quarter.”
For 2019, total expense increased 3.9%, driven by higher revenue- and capacity-related expenses, profit sharing, and pension expense, which were partially offset by $501 million lower fuel cost. CASM-Ex for 2019 increased 2% versus prior year, reflecting Delta's continued investment in our people, product and services.
Total expense for the December quarter increased 6.9% versus the prior year on higher revenue- and capacity-related expenses and profit sharing, which were partially offset by $315 million lower fuel cost. CASM-Ex was up 4.4% for the December quarter compared to the prior year driven by investment in our people, product and services, and a mark-up of benefit-related balance sheet obligations.
Fuel expense decreased 14% relative to December quarter 2018. Delta’s fuel price for the December quarter was $2.01 per gallon, including a $24 million benefit from the refinery.
Non-operating expense for the quarter was $256 million higher versus the prior year, driven primarily by pension expense and lower mark-to-market adjustments on investments, including our investment in GOL, which was sold during the December quarter 2019.
“Non-fuel unit costs for 2019 increased 2% versus prior year, in line with our long-term cost target and reflecting Delta’s continued investment in our people, product and services,” said Paul Jacobson, Delta’s chief financial officer. “These investments supporting our long-term growth will continue into 2020, and we expect our non-fuel unit costs will increase 2% to 3% for the March quarter and full year.”
Cash Flow and Shareholder Returns
For the full year, Delta generated $8.4 billion of operating cash flow and $4.2 billion of free cash flow. Full year cash flow is net of $1 billion of voluntary pension contributions, including $500 million made in the December quarter.
The company invested $4.5 billion into the business in 2019 including $954 million in the December quarter. This supported the delivery of 88 new aircraft during the year. The company's ongoing fleet transformation is driving higher customer satisfaction, premium seat growth and improved fuel efficiency.
For the December quarter, Delta generated $969 million of operating cash flow and $141 million of free cash flow. Delta returned $484 million to shareholders, comprised of $225 million of share repurchases and $259 million in dividends during the quarter. For the full year, Delta returned $3 billion to shareholders, including $2 billion of share repurchases and $980 million in dividends.
“Strong cash generation continues to set Delta apart and enables consistent reinvestment in the business while maintaining cash returns to owners at 70% of free cash flow,” added Jacobson. “We expect to generate free cash flow of $4 billion again this year, putting us on track to deliver a three-year cumulative free cash flow of over $10 billion by the end of 2020.”
In 2019, Delta achieved a number of milestones across its five key strategic pillars.
Culture and People
- Delta people earned $1.6 billion in profit sharing and $87 million in Shared Rewards, recognizing the outstanding performance of Delta's 90,000 employees through 2019.
- Contributed over $60 million and 800,000 volunteer hours in 2019 as part of Delta's commitment to the communities we serve. Introduced The Great Delta Give-Back, reinforcing commitment to the communities Delta serves around the world by providing employees an annual paid day of service.
- Delivered 281 days of zero mainline cancellations and 165 days of zero system cancellations through 2019, an improvement of 12% and 15%, respectively, versus 2018.
- Reached record completion factor in 2019 on a system and mainline basis, with mainline completion factor of 99.83%.
- Carried an all-time record 204 million customers in 2019, 6% more than prior year with a record load factor of 86.3%.
- Achieved 2% fuel efficiency improvement through fleet renewal and other initiatives. Delta also entered into an agreement with Gevo for 10 million gallons annually of sustainable aviation fuel.
Network and Partnerships
- Strengthened global partnerships in all international entities with: the announcement of a strategic alliance with LATAM Airlines Group including completion of a tender offer to acquire a 20% equity stake; the equity investment in Hanjin-KAL the largest shareholder of Korean Air; approval by the U.S. DOT for anti-trust immunity for the expanded joint venture between Delta, Air France, KLM and Virgin Atlantic.
- Announced a combination between Delta Private Jets and Wheels Up, a private aviation company, to create one of the world's largest owned and managed fleets of private aircraft, with over 190 aircraft and 8,000 customers in the combined company.
- Extended Delta's global reach with new service between Amsterdam-Tampa, Boston-Edinburgh, Boston-Lisbon, Minneapolis-Mexico City, Minneapolis-Seoul, New York JFK-Bogota, New York JFK-Mumbai and Seattle-Osaka.
Customer Experience and Loyalty
- Announced an 11-year contract renewal between Delta and American Express with contribution increasing from $4.1 billion in 2019 to nearly $7 billion by 2023, including a complete relaunch where cardholders will enjoy more ways to earn miles.
- Added a record number of new SkyMiles Members in one year with the number of new Members increasing at more than triple the rate of just three years ago and added record 1.1 million new Delta American Express cardholders, marking the third consecutive year of more than one million new cardholders.
- Debuted an industry-leading international Main Cabin experience designed by flight attendants to elevate and differentiate the customer experience on Delta featuring thoughtful touches like welcome cocktails, hot towel service, bistro-style dining and more.
- Took delivery of 88 new aircraft including the A220-100 and A330-900neo, with in-flight entertainment, spacious overhead bins and memory foam cushions throughout the aircraft for additional comfort.
- Released the updated FlyDelta app, providing automatic international check-in, integrated security wait times and the ability to pre-select meals in Delta One and domestic First Class.
- Awarded the No.1 airline in Business Travel News Airline Survey for a record ninth consecutive year, sweeping all 11 categories.
Investment Grade Balance Sheet
- Reported a 1.7x adjusted debt to EBITDAR ratio, toward the lower end of our long-term leverage ratio target of 1.5x to 2.5x adjusted debt to EBITDAR, which is expected to allow Delta to maintain investment grade ratings through a business cycle.
- Completed a $1.5 billion unsecured debt offering through a mix of five- and 10-year notes at a blended rate of 3.24%, the lowest unsecured rates achieved by Delta for these lengths of maturity in its history. The proceeds from this offering were used to fund the acquisition of the 20% equity stake in LATAM Airlines Group.
December Quarter and Full Year 2019 Results
Adjusted results primarily exclude the impact of mark-to-market ("MTM") adjustments.