Delta Airlines is forecasting another busy summer travel season, driven by sustained demand for leisure travel – not to mention a much stronger but slow-to-improve business travel sector in the wake of the virus pandemic caused by corona.
The company reported first-quarter 2024 earnings on Wednesday, revealing that it earned $37 million — a modest profit, though that’s not unexpected in the winter months.
During the conference call, executives from the Atlanta-based carrier shed light on Delta’s plans for this year and beyond.
The plans include a renewed focus on established hubs and plenty of anticipation of overseas travel – but perhaps a less optimistic view of the summer’s biggest global event.
Want more airline-specific news? Sign up for TPG’s free bi-weekly Aviation newsletter.
Tourism demand remains strong
As the calendar turns to 2024, travel industry watchers wonder whether the “revenge tourism” craze witnessed since 2022 might finally start to subside – or whether regulators Whether the packed airport terminals and tourist hotspots seen over the past two summers may still be here remains to be seen.
It seems to be the latter, at least for Delta.
Over the first three months of 2024, Delta recorded its 11 highest sales days ever, CEO Ed Bastian noted during a conference call with analysts Wednesday.
Has business travel finally recovered?
No doubt part of that sales surge is thanks to what Delta is describing as a “meaningful” step forward for its travel business.
Daily newsletter
Gift your inbox with the TPG Daily newsletter
Join over 700,000 readers to get breaking news, in-depth guides and exclusive offers from TPG experts
Since pandemic-related restrictions were lifted, the resurgence in travel has been led by leisure travel and, more recently, “group” travel (think visitors to conference). However, classic, last-minute, one- or two-day business trips consistently lag behind pre-pandemic levels.
And the travel landscape’s recovery across the United States has been uneven, as hotel analytics firm CoStar noted in a February report. report. The study found that by 2023, hotel revenue per room was up from 2019 levels in some popular convention destinations like Las Vegas, Phoenix, Tampa and San Diego… but lagging behind very far from places like San Francisco, Minneapolis, Philadelphia and Los Angeles.
Maybe 2024 will be different?
“Since the beginning of the year, we have seen a sustained acceleration in business travel,” Delta President Glen Hauenstein said Wednesday, noting that ticket sales through Corporate accounts grew 14% in January, February and March compared to the same period in 2023.
Leisure travel has not faded away either
But it’s not just business travelers giving Delta cause for optimism this year.
“Delta’s core consumers are in good shape and travel remains a top purchasing priority,” Bastian added on Wednesday’s conference call.
More broadly, there are signs of another big year for air travel; The Transportation Security Administration recorded the 10th busiest day ever at U.S. checkpoints leading up to the recent Easter weekend, highlighting demand for leisure travel such as weekend getaways. weeks and vacations continue.
A big part of Delta’s summer 2024 plans involves international flights.
According to aviation analytics firm Cirium, in June, July and August, Delta’s number of seats to Europe will increase 11% compared to 2019 (albeit a more modest 6% increase compared to last summer). , reflecting sustained interest in trips abroad.
This summer, Delta is also planning annual seat growth of more than 20% at trans-Pacific destinations in Australia, New Zealand, South Korea and Japan overall, according to Cirium.
“For many years, the Pacific has been a drag on our earnings,” Hauenstein told investors at an industry conference last month, noting that trans-Pacific travel is a of the factors Delta leaders are “most excited about” this year.
Paris 2024 will bring no benefits
When you combine big plans abroad with the need for sustainable travel, Delta should be very excited about the upcoming trip Olympic Games Paris 2024 … Right?
After all, among the Big Three US airlines, Delta has a larger presence in Paris than American Airlines and United Airlines combined, with 2.3 million seats at Paris-Charles de Gaulle Airport (CDG). expected this summer, according to Cirium.
Let’s just say, the outlook is a bit warmer than you might think.
“In general, the Olympics are not good for airline revenue. And I think this year is no exception,” Hauenstein said Wednesday, noting that business travel often takes a backseat in the weeks surrounding the Olympics.
“So I wouldn’t say it would be a blessing,” Hauenstein said. “It’s really going to be a headwind for us.”
Even so, Bastian is quick to say that Delta is behind the U.S. Olympians.
“We are excited as a sponsor of Team USA,” he said. “We will get through it.”
Delta’s Amex partnership is as strong as ever
Delta earned $1.7 billion through its partnership with American Express in the first quarter, executives said this week.
The company hopes to earn a whopping $7.5 billion through its partnership with Amex by 2024, surpassing last year’s equally impressive $6.8 billion.
Last month, Delta leaders reiterated a truth that is both common ground and a startling statistic: If you add up all the spending per Delta-Amex The company said customers charged fees to their cards, totaling up to 1% of U.S. gross domestic product.
Delta also noted how the company has worked with Amex to expand the number of retail locations where the issuer’s cards are accepted, a sometimes frustrating obstacle that has Amex card members complaining.
Amex cards are accepted by an “all-time high” among mechanics in the country, Hauenstein said. And increasingly, Delta and Amex are focusing on this issue in cities abroad – especially where the airline flies. SkyMiles members.
“We worked with [Amex] about prioritizing places where Americans like to vacation,” Hauenstein added.
That could mean more places abroad where you can swipe your card Delta SkyMiles® Reserve American Express Card when purchasing souvenirs or earn 4 membership rewards points per dollar by charging your dinner for American Express® Gold Card.
Respond to industry safety concerns
The aviation industry has faced negative attention in recent months, since The door latch exploded in mid-air aboard an Alaska Airlines Boeing 737 MAX 9 jet in January.
The incident has refocused attention on quality control issues at Boeing, helping give a boost Major leadership change at the aircraft manufacturer.
Recently, United also became the focus of attention amid a series of maintenance issues that prompted scrutiny by the Federal Aviation Administration (although a top TPG aviation expert questioned whether the series of incidents at United actually deviated from the norm).
Those events made United executives to write letters both customers and employees reaffirm the carrier’s commitment to safety.
When asked widely about maintenance challenges elsewhere in the industry and whether Delta plans any similar communications, Bastian said the following:
“Safety comes first every time, every day. We don’t send special messages about safety. Every day here is a safety day.”
For its part, Delta said it has committed significant resources to maintenance over the past year and noted Wednesday that the number of maintenance-related flight cancellations dropped significantly in the first quarter compared to the same period. last year.
Refocusing on its core cities
Over the past few years, Delta has grown at a breakneck pace at Boston Logan International Airport (BOS), solidifying its position as a leader in the aftermarket. announced the city as the center for the first time in 2019.
Cirium data shows that by 2024, Delta’s domestic seat count outside of Boston will increase by a staggering 34% compared to 2019.
But it comes at the cost of restoring capacity to aging cities, Delta executives said Wednesday.
“Coming out of COVID, we have to allocate available resources.” Hauenstein told analysts. “And those resources have provided us with once-in-a-lifetime opportunities to assume leadership positions in places like Boston and Los Angeles, at the expense of rebuilding core hubs.” ours.”
In his view, 2024 domestic seats from Hartsfield-Jackson Atlanta International Airport (ATL) and Minneapolis-St. Paul International Airport (MSP) is down more than 5% from 2019 levels, Cirium said. They are down 13% at Detroit Metropolitan Wayne County Airport (DTW).
But that may improve in the near future.
“The ability to go back and get seating back to our core now is where our focus is for the remainder of this year,” Hauenstein explained.
Among other steps, Delta hopes to continue improving regional jet usage. Amid a pilot shortage at regional airlines, Delta leaders estimate the airline’s network currently has 50 to 100 regional jets parked or underutilized.
Related reading:
