Delta announces its fourth quarter and full-year 2021 results PlatoAiStream PlatoAiStream. Data Intelligence. Vertical Search. Ai.

Delta announces its fourth quarter and full-year 2021 results

Delta announces its fourth quarter and full-year 2021 results PlatoAiStream PlatoAiStream. Data Intelligence. Vertical Search. Ai.

Delta Air Lines today reported financial results for the fourth quarter and full year 2021 and provided its outlook for the March quarter 2022.  Highlights of the December quarter and full year 2021 results, including both GAAP and adjusted metrics, are on page five and are incorporated here.

“2021 was a year like no other for Delta, with significant progress in our recovery supported by growing brand preference, enabling us to be the only major U.S. airline to deliver profitability across the second half of the year,” said Ed Bastian, Delta’s chief executive officer.  “As always, our people drove this success, which is why we were happy to announce this morning a special profit-sharing payment for all eligible employees.”

“While the rapidly spreading omicron variant has significantly impacted staffing levels and disrupted travel across the industry, Delta’s operation has stabilized over the last week and returned to pre-holiday performance,” Bastian said.  “Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel.”

Fourth Quarter 2021 Financial Results 

  • Adjusted pre-tax income of $170 million excludes a net impact of $564 million primarily in equity method losses, mark-to-market adjustments on investments and special profit-sharing payment
  • Adjusted operating revenue of $8.4 billion, which excludes third-party refinery sales, was 74 percent recovered versus December quarter 2019 on capacity that was 79 percent restored
  • Total operating expense decreased $833 million compared to the December quarter 2019. Adjusted for costs from third-party refinery sales, total operating expense decreased $1.9 billion or 19% percent in the December quarter 2021 versus the comparable 2019 period
  • Remuneration from American Express in the quarter was $1.2 billion, up 11 percent compared to the December quarter 2019
  • At the end of the December quarter, the company had $14.2 billion in liquidity, including cash and cash equivalents, short-term investments and undrawn revolving credit facilities

Full Year 2021 Financial Results 

  • Adjusted pre-tax loss of $3.4 billion excludes a net benefit of $3.8 billion from items primarily related to the Payroll Support Programs (PSP), partially offset by equity method losses, debt extinguishment charges and special profit-sharing payment
  • Generated a pre-tax profit of $1.1 billion in the second half of 2021. Excluding PSP, mark-to-market adjustments, equity method losses and debt extinguishment charges reported an adjusted pre-tax profit of $386 million in the second half of 2021
  • Adjusted operating revenue of $26.7 billion, which excludes third-party refinery sales, was 57 percent recovered versus full year 2019 on capacity that was 71 percent restored
  • Total operating expense, which includes $4.5 billion of benefit related to PSP, decreased $12.4 billion compared to 2019. Adjusted for the benefits related to PSP and costs from third-party refinery sales, total operating expense, adjusted decreased $10.9 billion or 27 percent versus 2019
  • Remuneration from American Express for full year 2021 was $4.0 billion, 98 percent restored compared to full year 2019
  • Invested $2.9 billion back in the business and reduced financial obligations by $7 billion, including fully funding the pension plans on a Pension Protection Act (PPA) basis
  • The company had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion at the end of December 2021

March Quarter 2022 Outlook

1Q22 Forecast

Capacity 1

83% – 85%

Total Revenue 1, 2

72% – 76%

Fuel Price ($/gal) 2, 3

$2.35 – $2.50

CASM-Ex 1, 2, 4

Up ~15%

Gross Capital Expenditures 2

~$1.6 billion

Adjusted Net Debt 2

~$22 billion

1 Compared to March quarter 2019

2 Non-GAAP measure

3 Fuel guidance based on prices as of January 11 (Brent at $81, cracks at $17, Monroe profit with RINS at $1.31)

4 Includes an ~3 point impact of operational disruption related cost

Revenue Environment

“The commercial strengths we spoke about last month at Capital Markets Day are evident in our December quarter results.  We ended December with revenues nearly 80 percent recovered to 2019 levels on strong demand and pricing during the holiday period, our premium products continued to perform well, we saw encouraging trends in business and international travel and our diverse revenue streams remained resilient,” said Glen Hauenstein, Delta’s president.

“The recent rise in COVID cases associated with the omicron variant is expected to impact the pace of demand recovery early in the quarter, with recovery momentum resuming from President’s Day weekend forward.  Factoring this in to our outlook, we expect total March quarter revenue to recover to 72 to 76% of 2019 levels, compared to 74% in the December quarter.”

Operating revenue, adjusted of $8.4 billion for the December quarter 2021 improved 2 percent, or $149 million from September quarter 2021.  Compared to the same period in 2019, operating revenue, adjusted was 74 percent restored, in line with the company’s mid-December guidance update on system capacity that was 79 percent restored compared to December quarter 2019 levels.

Compared to the September quarter 2021, system yields improved 7 percent on a system load factor decline of 2 points to 78 percent.  As a result, total unit revenue, adjusted improved 6 percent sequentially.

Delta announces its fourth quarter and full-year 2021 results PlatoAiStream PlatoAiStream. Data Intelligence. Vertical Search. Ai.

Revenue-related Highlights:

  • Domestic revenue recovery progresses on strong holiday demand: Domestic passenger revenue was 78 percent restored compared to December quarter 2019, a 6 point sequential improvement in the rate of recovery versus the September quarter 2021 driven by robust leisure demand, improving corporate travel and strong holiday bookings. International passenger revenue recovered to 50 percent of December quarter 2019 levels, an 8 point improvement sequentially.
  • Premium cabins continue to outperform main cabin: Domestic and short-haul Latin premium product revenue recovery outpaced main cabin by approximately 10 points, flat sequentially, with Domestic premium revenues 84 percent recovered compared to December quarter 2019.
  • Business demand continues to improve: Business travel continues to progress with domestic passenger volumes approaching 60 percent restored during the December quarter 2021. This includes both managed corporate and Small and Medium Enterprises.
  • American Express remuneration exceeded 2019 levels: American Express remuneration of $1.2 billion in the quarter was up 11 percent compared to December quarter 2019 and up 8 points sequentially. Co-brand spend was 121 percent of December quarter 2019, driven by strong holiday retail spend and T&E spend that exceeded December quarter 2019. Co-brand card acquisitions were 86 percent recovered compared to December quarter 2019.
  • Cargo revenue achieves five consecutive quarters of positive growth: Cargo revenue increased to $304 million, a 63 percent improvement compared to the December quarter 2019 and up 24 points sequentially on strong holiday demand and yields.

Cost Performance

“The Delta team executed incredibly well in 2021, delivering another profitable quarter in an environment that remains dynamic,” said Dan Janki, Delta’s chief financial officer.  “With omicron impacting our near-term outlook, we expect losses in January and February months with a return to profitability in the month of March.  Despite expectations for a loss in the March quarter, we remain positioned to generate a healthy profit in the June, September and December quarters, resulting in a meaningful profit in 2022.”

For 2021, total operating expense, adjusted of $29.2 billion decreased 27 percent compared to full year 2019, driven by lower salaries and related benefits, fuel and volume and selling-related expense.  Non-fuel CASM for 2021 increased 11.4 percent versus 2019, on 29 percent lower capacity over the same period.

Total operating expense, adjusted of $8.1 billion in the December quarter 2021 increased 3 percent sequentially, driven by both higher fuel and non-fuel costs from the continued restoration of the airline.

Fuel expense, adjusted of $1.6 billion in the December quarter 2021 increased 4 percent, or $55 million compared to the September quarter 2021.  Adjusted fuel price of $2.10 per gallon was up 8 percent compared to the September quarter 2021 driven by higher market prices and partially offset by continued refinery contribution and an improvement in RINs pricing and volume obligations.  During the December quarter 2021, fuel efficiency, defined as gallons per 1,000 ASMs, improved 4.3 percent versus the same period in 2019 as a result of our fleet renewal efforts.  In addition, carbon offsets expensed during the quarter drove a 3¢ impact on fuel prices as Delta supports its commitment to carbon neutrality by pursuing high quality, verified offsets.

Non-fuel cost, adjusted of $6.5 billion was up 3 percent sequentially on a 4 percent decrease in capacity.  This was driven primarily by people-related and seasonal costs.  Compared to the December quarter of 2019, non-fuel unit costs (CASM-Ex) were 8.3 percent higher, including a 1.2 point impact primarily due to omicron disruptions the last two weeks of the December quarter.

Non-operating expense for the December quarter 2021 was $658 million including equity method losses, mark-to-market losses on certain investments and losses on the extinguishment of debt.  Non-operating expense, adjusted was $175 million.

Balance Sheet, Cash and Liquidity

“During 2021, we made significant progress restoring our balance sheet, reducing gross debt by $6 billion and fully funding our pension plans on a PPA basis,” Janki said.  “Reducing debt remains a top financial priority as operating cash flow improves to support the return of our balance sheet back to investment grade metrics by 2024.”

At the end of the December quarter 2021, the company had total debt and finance lease obligations of $26.9 billion with adjusted net debt of $20.6 billion and a weighted average interest rate of 4.2 percent.

Operating cash flow during the December quarter 2021 was $555 million.  Free cash flow was negative $441 million for the quarter with gross capital expenditures reinvested in the business of $948 million.

The company’s Air Traffic Liability was $6.4 billion at December quarter-end, approximately flat compared to the end of the September quarter.

Delta ended the December quarter with $14.2 billion in liquidity, including $2.9 billion in undrawn revolver capacity.

Other Highlights from the December Quarter 2021

Culture and People

  • Increased vaccination rates to more than 95 percent of employees as Delta continues to prioritize the health and safety of the Delta people
  • Provided free, convenient COVID-19 testing options to Delta people
  • Celebrated 75 years of Delta Cargo, which has played a pivotal role throughout the pandemic transporting vaccines and personal protective equipment as well as life-saving organs for transplant
  • Committed to an eight-year partnership with LA28, making Delta the inaugural founding partner of the Olympic and Paralympic Games Los Angeles 2028 and a sponsor of the United States Olympic and Paralympic teams through 2028. As Team USA’s official airline, Delta will manage travel for U.S. Olympians and Paralympians to Beijing 2022, Paris 2024, Milano Cortina 2026 and Los Angeles 2028
  • Celebrated 200 Chairman’s Club inductees through a historic 25th annual gala; this special one-time class of 200 honorees were recognized for embodying the spirit of Delta

Customer Experience and Loyalty

  • Named No. 1 in the annual Business Travel News Airline Survey for the 11th consecutive year, sweeping all categories for the 8th straight year
  • Opened the first-ever Delta-TSA PreCheck express lobby and bag drop at Hartsfield-Jackson Atlanta International Airport, with expanded facial recognition capabilities for touch-free, seamless entry
  • Installed high-speed Viasat-powered Wi-Fi on 300 aircraft in 2021, enabling customers on Delta’s most popular routes to stream and browse their favorite sites at fast speeds for a simple, flat rate of $5 per flight
  • Launched in-flight entertainment partnership with leading interactive fitness platform Peloton to offer exclusive well-being focused content, giving customers more ways to stretch and unwind at their seats
  • Enhanced Delta FlyReady, a digital solution that takes the guesswork out of international travel in the pandemic era, enabling customers to understand and manage entry requirements at their destination
  • Extended Medallion Status for current Medallion members and rolled over all Medallion Qualification Miles for the second year in a row
  • Launched updates to Global Upgrade Certificates, allowing customers more access to premium seats in Delta Premium Select

Environmental, Social and Governance

  • Announced strengthening of executive leadership team with the hiring of Pam Fletcher as the industry’s only C-suite Chief Sustainability Officer
  • Recognized as the No. 1 transportation company on The Just 100: Companies Doing Right By America and an overall ranking of No. 38 on the comprehensive global list
  • Promoted health equity and responded to employee feedback with a new 2022 healthcare option designed to increase predictability and lower unplanned, out-of-pocket expenses for plan participants
  • Engaged senior leaders in Racial Equity Leadership Workshops, led by the Groundwater Institute
  • Built upon Delta’s commitment to supplier diversity by launching vodka from Du Nord Social Spirits, America’s first Black-owned distillery, on all domestic flights and Une Femme’s 100 percent women-made wine on select flights
  • Concluded 2021 with a robust set of climate-related goals including committing to set a medium-term science-based target for our global airline as well as a net zero emissions target for 2050, both aligned with the SBTi framework and the UN Race to Zero
  • Signed 27 SAF agreements with corporate and agency customers in 2021. Beginning in 2025, Delta expects to receive 81 million gallons of SAF annually from producers Aemetis, Gevo, Neste and NWABF

December Quarter and Full Year 2021 Results

December quarter and full year results have been adjusted primarily for the government grant recognition, impairments and equity method losses, losses on extinguishment of debt, unrealized losses on investments, special profit-sharing payment and third-party refinery sales as described in the reconciliations in Note A.

GAAP

Adjusted

GAAP

Adjusted

($ in millions except per share and unit costs)

4Q21

4Q19

4Q21

4Q19

FY21

FY19

FY21

FY19

Pre-tax (loss)/income

(395)

1,397

170

1,417

398

6,198

(3,415)

6,214

Net (loss)/income

(408)

1,099

143

1,098

280

4,767

(2,598)

4,776

(Loss)/diluted earnings per share

(0.64)

1.71

0.22

1.70

0.44

7.30

(4.08)

7.32

Pre-tax margin

(4.2)%

12.2 %

2.0 %

12.4 %

1.3 %

13.2 %

(12.8)%

13.3 %

Operating revenue

9,470

11,439

8,430

11,384

29,899

47,007

26,670

46,718

Total revenue per available seat mile (TRASM) (cents)

18.30

17.47

16.29

17.39

15.37

17.07

13.71

16.97

Operating expense

9,207

10,040

8,086

9,961

28,013

40,389

29,197

40,082

Capital expenditures

1,217

1,072

948

954

3,247

4,936

2,876

5,306

Total debt and finance lease obligations

26,920

11,160

26,920

11,160

Adjusted net debt

20,581

10,489

20,581

10,489

Cost per available seat mile (CASM) (cents)

17.79

15.34

12.56

11.59

14.40

14.67

12.12

10.88

Fuel expense

1,577

2,012

1,588

1,983

5,633

8,519

5,625

8,477

Average fuel price per gallon

2.09

2.01

2.10

1.99

2.02

2.02

2.02

2.01

Non-operating expense

658

2

175

6

1,488

420

888

422

Operating cash flow / free cash flow

555

969

(441)

141

3,264

8,425

1,255

4,164

Source: https://worldairlinenews.com/2022/01/13/delta-announces-its-fourth-quarter-and-full-year-2021-results/

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