Delta Airline's (DAL) shares are dropping Friday despite topping analyst estimates after the company said that a new labor deal with its pilots union will eat into its first quarter bottom line.
But the bears are missing the bigger story that Delta (and possibly the entire airline industry) is emerging from the pandemic stronger than it was prior to the disruption.
But there are still problems to be worked out at Delta as staffing issues keep the company from stepping into its full potential.
CEO Ed Bastian listed a timetable for recovery.
"We're doing our very best to get our people in place, the hiring is strong. We have the team assembled," Bastian said on the company's earnings call.
"We expect by the summer that we will be in position to have not just get through most of that bottleneck but then be large resource drain that it takes with respect to all the training that our existing team has to do to train our new employees... And then by summer we hope at Delta that we'll be able to be back 100%"
The company also said that it has seen the highest post-pandemic corporate booking days just in the past 10 days, also noting "very strong post-holiday demand."
But demand has not been the problem for the airline industry in months. The biggest problem has been the industry's ability to get passengers from point A to point B efficiently and on time.
Delta's Highlights
Delta had reason to be proud of its performance in the quarter, as Americans' desire for air travel helped its cement some of its industry-leading metrics.
The company said that it "secured the leading position" in both the large Boston and Los Angeles markets while also increasing its local market share at its core hubs.
Delta said that for the 12th consecutive year, the company was the top corporate airline in the Business Travel News survey of passengers.
The company's loyalty program is also seeing significant growth, with acquisitions 42% higher than they were in 2019, as it expands the number of companies it works with through its Delta Loyalty ecosystem.
The company specifically mentioned its partnership with American Express (AXP), which it says delivered record results with full-year remuneration of $5.5 billion ahead of its initial target. The company expects that number to rise to $6.5 billion in 2023 and over $7 billion 2024.
Delta's Print Is a Mixed Bag
Delta shares were falling after the company cut its profit forecast due to rising labor costs as the pressure for the company to increase pilot pay is expected to eat into its bottom line.
The company expects to earn between $0.15-$0.40 per share in the current quarter, well short of analysts' consensus $0.55 per share estimate.
But the profit outlook isn't a reflection of the state of the airline industry, as Delta says it expects to increase 2023 revenue by between 15%-20%, leading the company to reiterate its full year earnings outlook of between $5-$6 per share.
But the just-concluded quarter also showed signs that the company's finances are heading back to the levels before covid decimated the airline industry.
"Our December quarter earnings per share and margins exceeded guidance, marking a strong close to a year where we made significant progress regarding restoration of our financial foundation," Bastian said during the company's earnings call.
The company reported full-year earnings of $3.20 per share on $46 billion in revenue.
Operating revenue of $12.3 billion in the quarter was 8% higher than pre-pandemic levels in the December 2019 quarter. Delta reported operating income of $1.4 billion with an operating margin of 11.6%.
