01—Abstract
Summary
Summary of the 10-K filed February 15, 2019. Cited figures are marked; the original filing is the authoritative source.
Delta Air Lines, Inc. reported 2018 operating revenue of $44.44 billiona, up from $41.14 billion in 2017, and operating income of $5.26 billion versus $5.97 billion.
Net income was $3.94 billionb, or $5.67 per diluted share, compared with $3.21 billion ($4.43 per diluted share) in 2017. Operating expense rose to $39.17 billion, driven mainly by aircraft fuel and related taxes of $9.02 billion (up $2.26 billion) as the market price per gallon increased 31%, and by higher salaries and profit sharing. Total passenger revenue grew to $39.76 billion, with business cabin and premium product ticket revenue up 13.8% to $13.75 billion.
Cash flow from operations was $7.01 billionc in 2018, against $5.02 billion in 2017. Capital expenditures were $5.2 billion, used to take delivery of 68 new aircraft, and the company returned $2.5 billion to shareholders through $909 million of dividends and $1.58 billion of share repurchases. At December 31, 2018, Delta reported $4.8 billion of unrestricted liquidity, long-term debt and finance leases of $9.77 billion, and stockholders' equity of $13.69 billion.
The company's investment-grade ratings were reaffirmed by Fitch, Moody's and S&P during 2018. The filing also highlights several items relevant to future results: adoption of the new revenue and lease standards, a $1.14 billiond restricted cash balance for LaGuardia airport construction, a $16.16 billion aircraft purchase commitment, and pending regulatory approval of the WestJet joint venture and the combined three-party transatlantic joint venture. The company is a defendant in a capacity antitrust class action that it describes as without merit.
02—Key points
Key Highlights
- Operating revenue rose 8.0% to $44.44 billion, led by premium ticket revenue growth of 13.8% and total passenger revenue growth of 7.6%.
- Operating income declined to $5.26 billion from $5.97 billion, as operating expense increased 11.4% to $39.17 billion.
- Aircraft fuel and related taxes rose to $9.02 billion, up $2.26 billion, with the average price per gallon at $2.20 versus $1.68 in 2017.
- Net income increased to $3.94 billion from $3.21 billion, with diluted EPS of $5.67 versus $4.43, aided by a lower income tax provision and non-operating results.
- Operating cash flow was $7.01 billion, funding $5.2 billion of capital expenditures and $2.5 billion returned to shareholders.
- Liquidity stood at $4.8 billion at year-end 2018, including $3.0 billion of undrawn revolving credit facilities; $750 million was drawn in February 2019.
- Aircraft purchase commitments totaled $16.16 billion, with the company taking delivery of 68 new aircraft in 2018 and expecting to invest about $4.7 billion in 2019.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 15, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $44.44B$41.24B | +7.7% |
| Operating Expenses | $39.17B$35.17B | +11.4% |
| Operating Income | $5.26B$5.97B | −11.8% |
| Net Income | $3.94B$3.21B | +22.8% |
| EPS (Basic) | $5.69$4.45 | +27.9% |
| EPS (Diluted) | $5.67$4.43 | +28.0% |
| Shares Outstanding (Basic) | 691.00M720.00M | −4.0% |
| Shares Outstanding (Diluted) | 694.00M723.00M | −4.0% |
05—Questions
Frequently Asked Questions
How did higher fuel prices affect Delta's 2018 results?
Aircraft fuel and related taxes increased $2.26 billion to $9.02 billion, a 33.5% rise, driven by a 31% increase in the market price per gallon and 3.6% capacity growth. Delta said it offset the majority of the $2.3 billion fuel increase, and fuel represented 23.0% of operating expense in 2018 compared with 19.2% in 2017.
What drove revenue growth in 2018?
Operating revenue increased $3.30 billion, or 8.0%. Business cabin and premium product ticket revenue grew 13.8% to $13.75 billion, main cabin ticket revenue grew 4.0%, and other revenue grew 10.8%. International revenues rose 6.7% on a 0.9% capacity increase.
How is Delta's balance sheet and debt position described?
Long-term debt and finance leases, including current maturities, were $9.77 billion at December 31, 2018, up from $8.83 billion. Delta issued $1.6 billion of unsecured notes, $1.4 billion of NYTDC special facilities bonds and $621 million of aircraft-secured loans during 2018. The three major rating agencies reaffirmed investment-grade ratings, with outlooks listed as stable.
What capital return and share repurchase activity did Delta report?
Delta paid $909 million in dividends in 2018 and repurchased and retired 29 million shares for $1.58 billion. The quarterly dividend was raised to $0.35 per share in September 2018, and a $5 billion share repurchase program had $3.1 billion remaining at December 31, 2018.
What pending items could change Delta's business?
The WestJet trans-border joint venture and the combined three-party transatlantic joint venture with Air France-KLM and Virgin Atlantic remain subject to required regulatory approvals. The U.K.'s exit from the European Union, scheduled for March 29, 2019, creates uncertainty for Virgin Atlantic, in which Delta holds a 49% stake. Delta also faces a capacity antitrust class action, which the company says is without merit.
06—Continue