Delta reported the kind of Q1 profit airlines used to dream about today. You can read the press release for the full run down, but here are a few highlights taken directly from the release.
- Delta’s pre-tax income for the March 2014 quarter was $444 million, excluding special items1, an increase of $363 million over the March 2013 quarter on a similar basis.
- Delta’s net income for the March 2014 quarter was $281 million, or $0.33 per diluted share, excluding special items1. This is $196 million higher year over year despite $163 million of non-cash tax expense now recognized after the reversal of the company’s valuation allowance.
- On a GAAP basis including special items, Delta’s pre-tax income was $335 million and net income was$213 million, or $0.25 per diluted share.
- Delta cancelled more than 17,000 flights due to severe weather in January and February, double the number of flights cancelled for weather in 2013. These cancellations resulted in $90 million of lost revenue and $55 million lower pre-tax income.
- Results include $99 million in profit sharing expense in recognition of Delta employees’ contributions toward achieving the company’s financial goals.
- Delta generated $951 million of operating cash flow and $390 million of free cash flow in the March 2014quarter. This strong cash generation allowed the company to reduce its adjusted net debt to $9.1 billion, contribute more than $600 million of funding to its defined benefit pension plans, and return $176 million to shareholders through dividends and share repurchases.
I think the results are remarkable considering the atrocious winter we’ve had, and Delta’s leaders and all employees have every reason to feel good about it. Management is forecasting margins in Q2 of 14 to 16 percent, a number that your average company might not jump up and down about, but one that an airline could only imagine not all that long ago, even in a good year. Now that Delta is basking in the light of some financial success and has laid the groundwork for SkyMiles 2015, one could be forgiven for wondering just what else the folks at Delta might be thinking of next?
If, as I strongly suspect, SkyMiles 2015 arrives, Delta doesn’t miss a beat, and life goes on for the traveling masses, what will happen next? What else can Delta do to generate even more sizable profit margins going forward? And perhaps more importantly, what will the rest of the industry do to try and copy that success? You already know I think revenue based programs are coming to the rest of the industry, although that does not mean they must mirror SkyMiles 2015. What is left to monetize? Predictions?
-MJ, April 23, 2014