Delta Air Lines Q2 2022 Earnings Report Recap

^{Source: Predictions based on analysts' consensus from Visible Alpha}

Delta Air Lines (DAL) Financial Results: Analysis

Delta Air Lines Inc. (DAL) reported mixed earnings results for Q2 FY 2022. The airline reported adjusted earnings per share (EPS) that fell short of expectations. Revenue also failed to meet consensus estimates. Nonetheless, Delta said that operating revenue was 99% recovered compared with Q2 FY 2019 on an adjusted basis and with 82% capacity restoration. The company also reported its first double-digit operating margin since 2019, a sign that recovery is continuing after the pandemic-related travel slowdown.

DAL Load Factor

Delta's load factor was 87% for the June quarter, up significantly on a YOY basis and ahead of analyst predictions. Load factor is 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.

Delta's load factor typically ranged in the mid-80% area prior to the pandemic. It plunged early in 2020 as passengers ceased air travel due to pandemic-related shutdowns. For Q2 FY 2020 it dropped to 34.2%. While it has since recovered substantially, up until this point Delta has been unable to post a load factor above 80%. The load factor for Q2 FY 2022 is the company's strongest in several years.

DAL Outlook and Stock Performance

Delta expects meaningful full-year profitability for FY 2022, driven by an operating margin between 11% and 13% for Q3. The company expects total revenue for the upcoming September quarter to be 1%-5% up relative to figures for Q3 FY 2019, the last Q3 period prior to the pandemic. Meanwhile, Delta predicts that capacity will be down 15%-17% compared with Q3 FY 2019.

Delta shares fell in early trading immediately following the company's Q2 FY 2022 earnings release. This could widen the gap between Delta stock and the broader market; Delta shares provided 1-year trailing total returns of -27.4%, well below the S&P 500's total return of -12.9%, as of July 13, 2022.

Delta's next earnings report (for Q3 FY 2022) is expected to be released on Oct. 13, 2022.