01—Abstract
Summary
Summary of the 10-K filed February 12, 2024. Cited figures are marked; the original filing is the authoritative source.
Delta Air Lines, Inc.'s 2023 Form 10-K reports operating income of $5.5 billiona, an improvement of $1.9 billion from 2022, and operating income, adjusted (a non-GAAP measure excluding one-time pilot agreement expenses and other items) of $6.3 billion.
Operating revenue rose $7.5 billionb, or 15%, to $58.0 billion on a 17% increase in capacity, driven by demand for international travel and premium products. Net income was $4.609 billion, or $7.17 per diluted share, compared with $1.318 billion in 2022. Total operating expense rose 12% to $52.5 billion, including higher salaries and related costs, profit sharing of $1.4 billion, and an $864 million pilot agreement expense.
Non-operating income was $87 millionc, reflecting mark-to-market gains on equity investments (including Wheels Up) and lower interest expense. The company generated $6.5 billion of operating cash flow and $2.0 billion of free cash flow (a non-GAAP measure), and repaid approximately $4.1 billion of debt and finance leases during 2023. Liquidity was $6.8 billion at year-end, and debt and finance lease principal stood at $20.1 billion.
Management states its ongoing priority is restoring investment grade metrics, and the Board reinstated a quarterly dividend of $0.10d per share in 2023. The filing also notes that the Aeroméxico joint cooperation agreement's antitrust immunity renewal is pending, and that the company faces an ongoing capacity antitrust class action it believes is without merit.
The company expects 2024 capacity growth in the single digits for domestic operations, a 23% to 25% effective tax rate, and capital spending of roughly $5 billion excluding the LaGuardia project. Aircraft purchase commitments totaled approximately $17.5 billion at year-end, and the company agreed in January 2024 to purchase 20 A350-1000 aircraft.
02—Key points
Key Highlights
- Operating revenue of $58.0 billion, up 15% from 2022, on a 17% increase in capacity; passenger revenue rose 22% to $48.9 billion.
- Operating income of $5.5 billion (up $1.9 billion); operating income, adjusted of $6.3 billion, excluding a $864 million pilot agreement expense and mark-to-market hedge items.
- Net income of $4.609 billion, or $7.17 per diluted share, versus $1.318 billion ($2.06 per diluted share) in 2022.
- Operating cash flow of $6.5 billion and free cash flow of $2.0 billion (non-GAAP), after adjusting for the $735 million pilot ratification payment and other items.
- Debt and finance lease repayments of approximately $4.1 billion in 2023, including about $2.0 billion of early repayments; principal debt and finance leases totaled $20.1 billion at year-end.
- Liquidity of $6.8 billion at December 31, 2023; S&P upgraded the company's credit rating to BB+ in the September 2023 quarter.
- Aircraft purchase commitments of approximately $17.5 billion, and an agreement in January 2024 for 20 Airbus A350-1000 aircraft with options for 20 more.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 12, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $58.05B$50.58B | +14.8% |
| Operating Expenses | $52.53B$46.92B | +11.9% |
| Operating Income | $5.52B$3.66B | +50.8% |
| Net Income | $4.61B$1.32B | +249.7% |
| EPS (Basic) | $7.21$2.07 | +248.3% |
| EPS (Diluted) | $7.17$2.06 | +248.1% |
| Shares Outstanding (Basic) | 639.00M638.00M | +0.2% |
| Shares Outstanding (Diluted) | 643.00M641.00M | +0.3% |
05—Questions
Frequently Asked Questions
What drove the increase in Delta's 2023 revenue and profitability?
Operating revenue increased $7.5 billion, or 15%, primarily due to a 17% increase in capacity driven by strong international and domestic demand and premium product growth. Passenger revenue rose 22%, with the Atlantic and Pacific regions showing the largest percentage gains. Operating income increased $1.9 billion, partly offset by higher employee costs, including a new pilot agreement, profit sharing and volume-related expenses.
How did the pilot agreement affect Delta's 2023 results?
Delta pilots ratified a four-year Pilot Working Agreement effective January 1, 2023, including an initial 18% pay rate increase. The filing records $864 million in pilot agreement and related expenses, which includes a one-time $735 million payment and about $130 million of other benefit-related adjustments. The company excludes these items from its adjusted operating income and free cash flow measures.
What is Delta's approach to debt and capital returns?
Delta repaid about $4.1 billion of debt and finance leases in 2023 and states it will continue pre-paying debt, with a stated goal of regaining investment grade metrics. The Board reinstated a quarterly dividend of $0.10 per share, with payments in the September and December 2023 quarters totaling $128 million, and approved another $0.10 dividend payable in March 2024.
What risks or pending matters does the filing highlight?
The filing notes that the DOT tentatively dismissed the renewal application for the Aeroméxico antitrust immunity through an Order to Show Cause issued January 26, 2024; existing immunity remains in effect pending final adjudication. It also describes a pending capacity antitrust multi-district litigation, which Delta believes is without merit. Fuel price volatility, with fuel at 21% of operating expense in 2023, and pilot shortages affecting regional carriers are also identified as risks.
What are Delta's expectations for 2024?
The company expects moderate domestic capacity growth of single digits in 2024, a full-year effective tax rate between 23% and 25%, and capital spending of approximately $5 billion excluding the LaGuardia redevelopment. It expects fuel consumption to rise in line with capacity, and it anticipates elevated jet fuel prices early in 2024 compared with historical levels.
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