Delta Back in Red Figures as Airline Announces Q1 Loss

Delta had a very successful fourth quarter of 2022, with enough profit that the Atlanta-based carrier could return to its much-celebrated practice of profit sharing with its employees. However, this week the airline shared that it turned a staggering $363 million dollar loss in the first quarter of 2023.

In an earnings report this week, the airline posted revenue of $11.84 billion, which while high, was below the expected $11.99 billion Delta was anticipating. This translated to a net income of $163 million, below the anticipated $184 million in net income. 

The first quarter is typically the slowest for airlines in terms of revenue given lower demand in the winter months after the holidays. However, TSA's reported number — 2,114,088 passengers passing through airports on a daily average — actually outpaces the pre-COVID 2019 volume of 2,107,762 passengers. 

Delta's hindered ability to obtain a profitable market share of these passengers proved problematic as operating costs soared for the airline. 

Labor and fuel costs have recently been spiking, and with Delta recently approving pay raises upwards of 34% for pilots over the coming years, labor costs will continue to be high in the short term. However, analysts at Delta predict that extremely strong demand and a well-paid, fully staffed team will lead to profitability for the rest of the year.

While the airline initially planned to return to 2019-level operations this summer, fears over a chaotic travel season similar to last year's seem to have quelled those desires. C-suite members have already announced that that goal will be put on hold as Delta prepares for an influx of travelers as spring slowly shifts into summer. 

Moreover, it also appears that slightly reduced fare prices in the coming months will attract customers back to Delta. On several flights out of SFO, for example, prices for paid upgrades to first class, Delta One, and Delta Comfort+ are 5-10% lower than the Q1 rates, and additional capacity over the coming months should allow prices to ease a bit more. 

Delta already has some of the highest fares in the United States, and judging by financial results it appears that while revenue was relatively high for the airline, the current elasticity of the air travel demand suggests revenue could be increased with lower fares.

Despite these negative results for the airline, Delta remains as optimistic as ever. The airline expects revenue for Q2 to be 15 to 17 percent above 2022 levels as demand remains exceptionally strong. CEO Ed Bastian, though, has said that recently predicting consumer behavior has become more difficult. Bastian noted that consumers are buying tickers further in advance than normal, likely due to concerns about cancellations, but also to obtain cheaper fares.