Delta Sees Stable Corp. Demand as Q1 Revenue Up

Delta Air Lines reported first-quarter record revenue of $12.8 billion, a 36 percent increase from $9.3 billion a year prior, according to the carrier. It also was 14 percent higher than the first quarter of 2019 on 2 percent less capacity, Delta president Glen Hauenstein said during a Thursday earnings call. 

Business travel improved in the quarter, with sales from small and medium businesses ahead of 2019 levels, while managed corporate travel demand showed steady progress led by international, Hauenstein said. International corporate sales accelerated sequentially to about 90 percent recovered compared with 2019 levels, excluding China. Domestic corporate sales for the quarter were approximately 85 percent of 2019 levels. 

A recent survey Delta conducted of its corporate clients showed that 96 percent expect their travel will increase or stay the same in the second quarter from the first quarter. Overall, the carrier expects the corporate segment to remain stable in the second quarter at 85 percent revenue versus 2019 and 75 percent of traffic, according to Hauenstein.

Hauenstein also noted that throughout the recovery, travel behaviors and patterns have continued to evolve. The hybrid workplace is blurring the lines between business and leisure trips, he said, while the removal of change fees has increased customer flexibility, allowing customers to book trips earlier. 

“This dynamic was more pronounced in the March quarter, and so we are continuing to adopt and see opportunities to further optimize our revenue management approach to these new travel behaviors in future months,” he said.

Delta also is seeing the average length of trip change, and “road warriors are not staying one day,” Hauenstein said. “Day trips are down.” Previously, he added, the carrier would look to advanced-purchase trends to differentiate business and leisure performance, but now views length of stay as a more pertinent metric. “And even with stay, it’s not as defined as it used to be,” he said.

Still, Delta CEO Ed Bastian added that corporations are making a “pretty significant push” to get workers back in the office. “We have seen a high correlation between the opening of offices with the return of corporate travel, principally with consultancies, advisors, people being available to take meetings,” he said. “I think you’re going to continue to see that over the course of the year, [and it] is going to be, I think, a good tailwind for us on the corporate revenue front.”

Meanwhile, technology is one of the least recovered sectors, while financial services is “surprisingly” showing some momentum, Hauenstein said, given layoffs in the latter industry. 

Still, Hauenstein noted, corporate travelers largely haven’t returned to pre-pandemic levels of premium-class bookings, a trend mitigated by increased interest from “high-end leisure customers, and that’s really providing a very nice insulation for us.”

Q1 2023 Metrics

Delta reported $10.4 billion in first-quarter passenger revenue, up 51 percent year over year. Delta posted a net loss for the quarter of $363 million compared with a net loss of $940 million in the first quarter of 2022. The quarterly average fuel price of $3.01 per gallon was up from $2.79 in Q1 2022. 

Delta offered second-quarter guidance of $14.2 billion to $14.4 billion in revenue, an increase of 15 percent to 17 percent year over year. Average quarterly fuel costs are forecast to be $2.55 to $2.80 per gallon. Full-year revenue is expected to be 15 percent to 20 percent higher than in 2022.

“We are planning to grow June-quarter capacity 17 percent over last year to meet strong customer demand,” Bastian said. “This growth is, though, a couple of points below our initial plan to fully restore capacity this summer.” 

Going forward, Delta will stop comparisons to 2019 figures and return to year-over-year metrics.

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