June Quarter Financial Highlights
Adjusted earnings per share were $2.35, reflecting a 32 percent increase year over year with 8.7 percent top-line growth, 2.3 points of operating margin expansion and $1.8 billion of free cash flow.
Total adjusted revenue, which excludes refinery sales, grew nearly $1 billion to $12.5 billion, a new quarterly record, with 52 percent of adjusted revenue from premium products and non-ticket sources.
Total unit revenue, adjusted, increased 3.8 percent driven by healthy growth in leisure and corporate revenue and an approximate one point benefit from the amended American Express agreement announced earlier this year.
Non-fuel unit cost (CASM-Ex) increased 1.4 percent compared to the prior year period, driven by better operations, fleet transformation and efficiency initiatives.
Generated $5.2 billion of operating cash flow and $2.5 billion of free cash flow on a year-to-date basis, after investing $2.7 billion into the business, primarily for aircraft purchases and modifications.
Returned $497 million to shareholders, comprised of $268 million of share repurchases and $229 million in dividends.
“Our record June quarter financial and operating results demonstrate that we are translating our powerful brand and competitive advantages into earnings growth, margin expansion and solid returns for our owners. Our people are the best in the business and I’m proud to recognize their hard work and dedication this quarter with an additional $518 million toward next year’s profit sharing,” said Ed Bastian, Delta’s chief executive officer. “With our strong first half performance and building momentum from our customer-focused initiatives, we are increasing our full-year earnings guidance to $6.75 to $7.25 per share.”
September Quarter 2019 Outlook
For the September quarter, Delta expects to deliver solid top-line growth and margin expansion.
Delta’s adjusted operating revenue of $12.5 billion for the June quarter improved 8.7 percent, $1 billion higher than prior year quarter. This revenue result marks a record for the company, driven by improvements across Delta’s business, including a ten percent increase in premium product ticket revenue and double-digit percentage increases in loyalty and third-party maintenance revenue. Cargo revenue during the quarter declined 17 percent driven by lower volumes and yield. Other revenue declined by $24 million as growth in loyalty and third-party maintenance was offset by $176 million lower third-party refinery sales.
Passenger Revenue by Geographic Region:
“With record passenger loads, customer satisfaction and $1 billion in revenue growth for the June quarter, demand for Delta’s customer-focused product and service has never been stronger. Our third quarter is off to a great start with a new highest revenue day on record on July 7th,” said Glen Hauenstein, Delta’s president. “We now expect revenue growth of six to seven percent for the year, a $3 billion increase over 2018, as we benefit from our multi-year pipeline of fleet, product, and loyalty initiatives.”
Total adjusted operating expense for the June quarter increased $559 million versus the prior year quarter, with approximately 20% due to higher profit sharing expense. CASM-Ex was up 1.4 percent for the June quarter 2019 compared to the prior year quarter. This performance was driven by industry-leading operations, savings from the company’s fleet transformation and the One Delta efficiency initiative, which partially offset investments in our people and product. During the quarter, the company decided to accelerate retirement of its MD-90 fleet by two years to the end of 2022, which pressured CASM-Ex by approximately $60 million due to higher depreciation expense.
Adjusted fuel expense decreased $35 million, down two percent, relative to June quarter 2018. Delta’s adjusted fuel price per gallon for the June quarter was $2.08, which includes a $37 million benefit from the refinery.
Adjusted non-operating expense for the quarter was $60 million higher versus the prior year quarter, driven primarily by lower pension income and lower results from international equity partners.
Cash Flow and Shareholder Returns
Delta generated $3.3 billion of operating cash flow and $1.8 billion of free cash flow during the quarter after the investment of $1.4 billion into the business primarily for aircraft purchases and improvements. Year-to-date, the company has generated $5.2 billion of operating cash flow and $2.5 billion of free cash flow.
For the June quarter, Delta returned $497 million to shareholders, comprised of $268 million of share repurchases and $229 million in dividends. The company also completed repayment of the $1 billion short-term loan that was used to accelerate the repurchase of shares in the March quarter.
The Board of Directors today declared a quarterly dividend of $0.4025 per share, an increase of 15% over previous levels. This marks the sixth consecutive increase in Delta’s dividend since it was established in 2013. The September quarter dividend will be payable to shareholders of record as of the close of business on July 25, 2019, to be paid on August 15, 2019.
“With efficiency gains from our operations, fleet transformation, and One Delta initiatives, we have solid line of sight to achieve our 1% cost growth target for the year,” said Paul Jacobson, Delta’s chief financial officer. “Our strong financial foundation and cash generation allow us to sustainably invest in the business, while maintaining our investment grade balance sheet and consistently returning cash to shareholders. With our cash flow exceeding original expectations, we are on track to return $3 billion to our owners this year through share repurchases and our increased dividend.”
In the June quarter, Delta achieved a number of milestones across its five key strategic pillars.
Culture and People
Network and Partnerships
Customer Experience and Loyalty
Investment Grade Balance Sheet
June Quarter Results
Adjusted results primarily exclude the impact of unrealized gains/losses on investments.
Delta Air Lines (NYSE: DAL) is the U.S. global airline leader in products, services, innovation, reliability and customer experience. Powered by its 80,000 people around the world, Delta continues to invest billions in its people, improving the air travel experience and generating industry-leading shareholder returns.
Forward Looking Statements
Statements in this press release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the cost of aircraft fuel; the availability of aircraft fuel; the impact of fuel hedging activity including rebalancing our hedge portfolio, recording mark-to-market adjustments or posting collateral in connection with our fuel hedge contracts; the performance of our significant investments in airlines in other parts of the world; the possible effects of accidents involving our aircraft; breaches or security lapses in our information technology systems; disruptions in our information technology infrastructure; our dependence on technology in our operations; the restrictions that financial covenants in our financing agreements could have on our financial and business operations; labor issues; the effects of weather, natural disasters and seasonality on our business; the effects of an extended disruption in services provided by third parties; failure or inability of insurance to cover a significant liability at Monroe’s Trainer refinery; the impact of environmental regulation on the Trainer refinery, including costs related to renewable fuel standard regulations; our ability to retain senior management and key employees; damage to our reputation and brand if we are exposed to significant adverse publicity through social media; the effects of terrorist attacks or geopolitical conflict; competitive conditions in the airline industry; interruptions or disruptions in service at major airports at which we operate; the effects of extensive government regulation on our business; the sensitivity of the airline industry to prolonged periods of stagnant or weak economic conditions; uncertainty in economic conditions and regulatory environment in the United Kingdom related to the exit of the United Kingdom from the European Union; and the effects of the rapid spread of contagious illnesses.
Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of July 11, 2019, and which we have no current intention to update.