How much did the CrowdStrike-caused outage affect Delta's September quarter results?

The filing states the outage had a direct revenue impact of approximately $380 million, primarily from customer refunds for cancelled flights and customer compensation, and a non-fuel expense impact of $170 million. Fuel expense was $50 million lower because of the 7,000 flight cancellations over five days. Management stated the outage reduced operating margin by 2.3 points and EPS by 45 cents.

What is Delta's outlook for the December 2024 quarter?

Delta expects total revenue to grow 2% to 4% year over year on capacity growth of 3% to 4%, with an operating margin of 11% to 13% and EPS of $1.60 to $1.85. Management expects December quarter pre-tax profit to grow 30% over the prior year to $1.4 billion and anticipates a 1-point impact to total unit revenue from reduced travel demand around the election.

Why did adjusted EPS decline compared with the prior year?

The filing reports adjusted September quarter EPS of $1.50 versus $2.03 a year earlier, with adjusted operating income of $1.37 billion versus $1.96 billion. The filing attributes the outage impact to these results. Adjusted total unit revenue (TRASM) fell 3.6%, and non-fuel CASM rose 5.7%, which the company attributes partly to higher costs in the period.

How is Delta's balance sheet and debt position trending?

Adjusted net debt was $18.7 billion at September 30, 2024, down $2.9 billion from year-end 2023. Total debt and finance lease obligations were $17.7 billion, with a weighted average interest rate of 4.3%, 94% fixed-rate debt, and adjusted debt to EBITDAR of 2.9x. Year-to-date debt repayments were $2.4 billion, and Fitch upgraded the company to investment grade.

What drove revenue performance in the quarter?

Management said unit revenue growth improved sequentially in all geographic entities, and Domestic and Transatlantic unit revenue turned positive in September. Diversified revenue streams, led by premium and loyalty, made up 57% of adjusted operating revenue, and cargo revenue grew 27%. Loyalty revenue grew 6% and American Express remuneration was $1.8 billion, up 6%.

DAL 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 10, 2024. Cited figures are marked; the original filing is the authoritative source.

Delta Air Lines, Inc. reported results for the quarter ended September 30, 2024 in a press release furnished as Exhibit 99.1, with supplemental information furnished as Exhibit 99.2.

GAAP operating revenue was $15.7 billion^a, operating income was $1.4 billion (8.9% operating margin), and diluted EPS was $1.97. Excluding the impact of the CrowdStrike-caused outage and adjusting for third-party refinery sales and investment mark-to-market items, the company reported operating revenue of $14.6 billion, an operating margin of 9.4%, pre-tax income of $1.3 billion, and EPS of $1.50. The outage carried a direct revenue impact of approximately $380 million and a non-fuel expense impact of $170 million, and reduced September quarter EPS by 45 cents.

For the December 2024 quarter, Delta guided to total revenue growth of 2% to 4% year over year, an operating margin of 11% to 13%, and EPS of $1.60 to $1.85^b, with capacity growth of 3% to 4%. Management expects pre-tax profit of $1.4 billion, up 30% from the prior year. Management also cited unit revenue growth improving sequentially in all geographic entities and positive unit revenue inflection in September for Domestic and Transatlantic.

Non-GAAP adjusted total unit revenue (TRASM) declined 3.6% year over year, including a 1.1-point outage impact. On the balance sheet, adjusted net debt was $18.7 billion^c at quarter end, down $2.9 billion from year-end 2023. Year-to-date debt repayments totaled $2.4 billion, and the company reported year-to-date free cash flow of $2.7 billion.

Fitch upgraded Delta to investment grade during the quarter, and the company is now investment grade at Moody's and Fitch and one notch from investment grade at S&P, which has a positive outlook. Adjusted debt to EBITDAR was 2.9x^d.

02—Key points

Key Highlights

GAAP operating revenue of $15.7 billion (up 1% year over year) and GAAP diluted EPS of $1.97 for the September 2024 quarter, versus $1.72 in the prior-year quarter.
CrowdStrike-caused outage reduced September quarter operating margin by 2.3 points and EPS by 45 cents, with a direct revenue impact of about $380 million and a non-fuel expense impact of $170 million.
Non-GAAP September quarter EPS of $1.50 (down from $2.03 a year earlier), with an adjusted operating margin of 9.4% versus 13.5%.
December quarter guidance: total revenue up 2% to 4% year over year, operating margin of 11% to 13%, and EPS of $1.60 to $1.85.
Non-fuel unit cost (CASM-Ex) rose 5.7% year over year to 13.30 cents in the September quarter; management expects low-single-digit non-fuel unit cost growth for the full year.
Adjusted net debt fell to $18.7 billion, a reduction of $2.9 billion from year-end 2023; year-to-date free cash flow was $2.7 billion and year-to-date debt payments were $2.4 billion.
Fitch upgraded Delta to investment grade; the company is now rated investment grade by Moody's and Fitch and is one notch away at S&P, which has a positive outlook.

03—Questions

Frequently Asked Questions

How much did the CrowdStrike-caused outage affect Delta's September quarter results?
The filing states the outage had a direct revenue impact of approximately $380 million, primarily from customer refunds for cancelled flights and customer compensation, and a non-fuel expense impact of $170 million. Fuel expense was $50 million lower because of the 7,000 flight cancellations over five days. Management stated the outage reduced operating margin by 2.3 points and EPS by 45 cents.
What is Delta's outlook for the December 2024 quarter?
Delta expects total revenue to grow 2% to 4% year over year on capacity growth of 3% to 4%, with an operating margin of 11% to 13% and EPS of $1.60 to $1.85. Management expects December quarter pre-tax profit to grow 30% over the prior year to $1.4 billion and anticipates a 1-point impact to total unit revenue from reduced travel demand around the election.
Why did adjusted EPS decline compared with the prior year?
The filing reports adjusted September quarter EPS of $1.50 versus $2.03 a year earlier, with adjusted operating income of $1.37 billion versus $1.96 billion. The filing attributes the outage impact to these results. Adjusted total unit revenue (TRASM) fell 3.6%, and non-fuel CASM rose 5.7%, which the company attributes partly to higher costs in the period.
How is Delta's balance sheet and debt position trending?
Adjusted net debt was $18.7 billion at September 30, 2024, down $2.9 billion from year-end 2023. Total debt and finance lease obligations were $17.7 billion, with a weighted average interest rate of 4.3%, 94% fixed-rate debt, and adjusted debt to EBITDAR of 2.9x. Year-to-date debt repayments were $2.4 billion, and Fitch upgraded the company to investment grade.
What drove revenue performance in the quarter?
Management said unit revenue growth improved sequentially in all geographic entities, and Domestic and Transatlantic unit revenue turned positive in September. Diversified revenue streams, led by premium and loyalty, made up 57% of adjusted operating revenue, and cargo revenue grew 27%. Loyalty revenue grew 6% and American Express remuneration was $1.8 billion, up 6%.

04—Continue

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