Delta expects continued recovery in 2023

Credit: Christina Matacotta

Credit: Christina Matacotta

Delta Air Lines foresees strong travel demand this month and expects to grow revenue by 15-20% next year, according to its latest financial update.

Atlanta-based Delta has been focusing on rebuilding its operation after cutting flights and slashing headcount through early retirements and buyouts during the COVID-19 pandemic. This year, it expects to post about $45.5 billion in revenue.

Even amid an uncertain economic environment, it plans to grow revenue next year by fully restoring its flight schedule to pre-pandemic levels by next summer.

Much of the airline’s focus to add flights back next year will be in Atlanta, which is its “biggest, most profitable hub,” according to Delta chief financial officer Dan Janki in remarks during the company’s investor day Wednesday.

Because Delta held back on restoring more flights in Atlanta and other inland hubs this year, Hartsfield-Jackson’s traffic is still well below pre-pandemic levels. Atlanta airport general manager Balram Bheodari expects the airport to handle about 93 million passengers this year — down from more than 110 million in 2019.

This year, Delta focused on adding flights at its coastal hubs in New York, Boston, Seattle and Los Angeles to maintain market share in those competitive markets. In 2023, Atlanta will make up 45% of Delta’s domestic growth.

“Demand for air travel remains robust as we exit the year,” said Delta CEO Ed Bastian in a written statement.

The company is one year into a three-year recovery plan, with expectations for an operating margin of 11% this quarter.

High air fares this year have driven up the cost of travel for consumers, while generating profits for airlines. Next year, Delta expects to nearly double its adjusted earnings per share to $5-$6 per share.

The airline’s executives say they are focusing on premium travelers who are willing to pay for extra services. More than half of the airline’s revenue comes from premium passengers and other sources besides airline tickets, including revenue from its American Express credit card partnership.

“The premium sector is the one that is the most resilient,” said Delta president Glen Hauenstein. “We are continuing to move our products and services to be designed for those customers who are willing to pay for something other than than just a seat.”

Less than 5% of Delta’s passenger revenue this year has come from basic economy bookings, which are budget tickets with less flexibility. The airline also plans to stop using small 50-seat regional jets next year, replacing those with larger aircraft with first class, as regional carriers continue to struggle to attract enough pilots.

Delta has hired 2,500 pilots over the past year. Yet Bastian said that because of pilot constraints and limitations on training resources, the industry’s recovery is still “fragile.”

“It’s a significant gap between where we need to be and how quickly we can move,” Bastian said.

The company is also working to gradually rebuild its financial strength after taking on billions of dollars in debt during the pandemic.

Delta had adjusted net debt of $20.5 billion as of Sept. 30 — double the debt it had in 2019 before the pandemic — and said earlier this year it aims to get down to $15 billion in adjusted net debt by 2024.