Delta Air Lines Q2 FY2022 Earnings Report Preview: What to Look For

Delta Air Lines Inc. (DAL) has seen passenger travel and revenue rebound significantly in recent quarters after the COVID-19 pandemic severely disrupted the industry. But the airline now is grappling with new challenges related to the rebound. Delta has been forced to cut about 100 flights per day for several weeks during this summer due to bad weather, worker absences, and other operational issues. Other U.S. carriers have also cut capacity as they balance increasing demand with a nationwide pilot shortage.

Investors will be looking to see how Delta's finances are faring amid these challenges when the company reports earnings on July 13, 2022 for Q2 FY 2022. For Q2, analysts predict that the company will post its highest adjusted earnings per share (EPS) since Q4 FY 2019. Revenue is also expected to be the highest since Q3 FY 2019.

Investors will also focus on Delta's load factor, a key metric used by air carriers to gauge what percentage of paid-passenger seating capacity is being filled. Analysts estimate that the carrier's load factor will rise to 85.3%, a dramatic improvement from its lows in Q2 FY 2021 and roughly in line with annual load factors before the pandemic: in FY 2017, 2018, and 2019.

Delta shares have underperformed the market in the past year. The company's stock has seen numerous advances during that period, including in September and early November 2021 and again in the new year. But each of those has been followed by steep pullbacks. The sharpest declines took place during the second half of February through early March 2022 and, most recently, in June. As of this writing, Delta has provided 1-year trailing total returns of -26.7%, below the S&P 500's -12.1%.

Delta Air Lines Earnings History

Delta's adjusted EPS was significantly impacted by the pandemic-related travel disruptions in the past several years. The company posted adjusted losses per share for six straight quarters from Q1 FY 2020 through Q2 FY 2021. Delta then posted modest profits, as measured by adjusted EPS, in the final two quarters of FY 2021, followed by a loss in the first quarter of this year. For Q2 FY 2022, analysts expect the company to report adjusted EPS of $1.61. That would be the largest number since Q4 FY 2019, although still well below pre-pandemic levels.

Delta's revenue has also been dramatically depressed due to the pandemic. Revenue dropped from $12.6 billion in Q3 FY 2019 to as low as $1.5 billion in Q2 FY 2020. Since then, the company's revenue has gradually increased. It reached $7.1 billion in Q2 FY 2021 and has risen to between $9.2 billion and $9.5 billion in each of the last three quarters through Q1 FY 2022. For the second quarter of this year, analysts estimate that Delta will post $13.1 billion in revenue, its strongest quarterly revenue since before the pandemic.

^{Source: Visible Alpha}

The Key Metric

As mentioned above, investors will also be focused on Delta's load factor, a key metric indicating the percentage of a carrier's available seats that are filled with paying passengers. A high load factor, as opposed to a low load factor, indicates that a high percentage of seats are occupied by passengers. Because the costs of sending an aircraft into flight are relatively the same whether there are 50 people aboard or 100, airlines have a strong incentive to fill as many seats as possible by selling more tickets. Higher load factors mean an airline's fixed costs are spread across a greater number of passengers, making the airline more profitable. The pandemic led to a reduction in air travel, leaving airlines with high fixed costs amid falling load factors and revenues, the combination of which caused steep losses. As travel demand has rebounded, higher fuel prices and inflation have forced many airlines to increase ticket prices as well.

In FY 2018 and FY 2019, Delta's annual load factor was 85.5% and 86.3% respectively. It plummeted early in the pandemic, reaching a low of 34.2% in Q2 FY 2020. Delta's load factor has increased gradually since that time, rebounding to 79.6% in Q3 FY 2021, though still below pre-pandemic levels. That may change soon. For Q2, analysts estimate that Delta will report a load factor of 85.3%. That would be its highest load factor in several years and a sign that Delta's business is on the path to full recovery.