Question

In: Finance

1) Discuss Delta Airlines Financial position and important financial activities for the fiscal year 2019.

1) Discuss Delta Airlines Financial position and important financial activities for the fiscal year 2019.

Solutions

Expert Solution

Full Year Financial Highlights

  • Adjusted earnings per share of $7.31, a 30% increase year over year
  • Total revenue increased to a record $47 billion, up 7.5% when prior year period is adjusted for third-party refinery sales and the sale of DGS
  • Total expense increased 3.9% with CASM-Ex up 2%, in line with the company's guidance and long-term cost targets
  • Delta's 90,000 employees will share a record $1.6 billion profit sharing payout on Feb. 14
  • Generated $8.4 billion of operating cash flow and $4.2 billion of free cash flow
  • Returned $3 billion to shareholders through dividends and share repurchases

"2019 was a truly outstanding year on all fronts – the best in Delta's history operationally, financially.

March Quarter 2020 Outlook

1Q20 Forecast

Total revenue growth (year-over-year)

Up 5% to 7%

Pre-tax margin (year-over-year)

~ Flat

Fuel price, including taxes and refinery impact

$2.00 to $2.20

TRASM, adjusted (year-over-year)

Flat to up 2%

CASM-Ex (year-over-year)

Up 2% to 3%

See Note A for information about reconciliation of projected non-GAAP financial measures


For the full year, operating revenue grew to nearly $47 billion, up 7.5% when prior year period is adjusted for third-party refinery sales and the sale of DGS. Premium product ticket revenue increased 9% along with strong double-digit percentage increases from loyalty and third-party maintenance revenue.

Delta's operating revenue of $11.4 billion for the December quarter improved 7.2% or $768 million over the prior year (adjusted for the sale of DGS). This was driven by a 9% increase in premium product ticket revenue, an 18% increase in loyalty revenue and a 31% increase in third-party maintenance revenue, which was partially offset by 13% lower cargo revenue.

December quarter passenger revenue by geographic region:

  • Domestic revenue grew 7.7% in the quarter on 1.6% higher passenger unit revenue (PRASM) and 6% higher capacity. Domestic premium product revenue grew 11% and corporate revenue grew 6%, driven by strength in business and leisure demand through the holiday period. Revenue and margin improved in all domestic hubs with revenue up 10% in coastal hubs and 6% in core hubs.
  • Atlantic revenue grew 0.8% in the quarter on 2.4% higher capacity and a 1.6% decline in PRASM, driven almost entirely by foreign exchange rates.
  • Latin revenue grew 6.7% on a 6.3% increase in unit revenue and 0.4% higher capacity. This revenue improvement was driven by continued double-digit unit revenue growth in Brazil and Mexico.
  • Pacific revenue was down 0.5% versus prior year on a 4.4% decline in unit revenue primarily due to continued softness in China. This was a 3.2 point improvement versus the September quarter on improved trends in Japan and strong Delta Premium Select performance.

"Our industry-leading operational performance and the unmatched service our people provide are the reasons why more customers than ever are choosing to fly Delta. Investments in reliability, product and service, airports and technology are reshaping customer perception and driving record satisfaction scores and increasing brand preference." said Glen Hauenstein, Delta's president. "We delivered $47 billion in revenue in 2019, a more than $3 billion increase when adjusted over prior year, while sustaining a revenue premium to the industry of more than 110%. Demand trends remain healthy and we expect momentum to continue in 2020, with revenue growth of 5% to 7% in the March quarter."

Cost Performance

For 2019, total expense increased 3.9%, driven by higher revenue- and capacity-related expenses, profit sharing, and pension expense, which were partially offset by $501 million lower fuel cost. CASM-Ex for 2019 increased 2% versus prior year, reflecting Delta's continued investment in our people, product and services.    

Total expense for the December quarter increased 6.9% versus the prior year on higher revenue- and capacity-related expenses and profit sharing, which were partially offset by $315 million lower fuel cost. CASM-Ex was up 4.4% for the December quarter compared to the prior year driven by investment in our people, product and services, and a mark-up of benefit-related balance sheet obligations.

Fuel expense decreased 14% relative to December quarter 2018. Delta's fuel price for the December quarter was $2.01 per gallon, including a $24 million benefit from the refinery.

Non-operating expense for the quarter was $256 million higher versus the prior year, driven primarily by pension expense and lower mark-to-market adjustments on investments, including our investment in GOL, which was sold during the December quarter 2019.

"Non-fuel unit costs for 2019 increased 2% versus prior year, in line with our long-term cost target and reflecting Delta's continued investment in our people, product and services," said Paul Jacobson, Delta's chief financial officer. "These investments supporting our long-term growth will continue into 2020, and we expect our non-fuel unit costs will increase 2% to 3% for the March quarter and full year."

Cash Flow and Shareholder Returns

For the full year, Delta generated $8.4 billion of operating cash flow and $4.2 billion of free cash flow. Full year cash flow is net of $1 billion of voluntary pension contributions, including $500 million made in the December quarter.

The company invested $4.5 billion into the business in 2019 including $954 million in the December quarter. This supported the delivery of 88 new aircraft during the year. The company's ongoing fleet transformation is driving higher customer satisfaction, premium seat growth and improved fuel efficiency.

For the December quarter, Delta generated $969 million of operating cash flow and $141 million of free cash flow. Delta returned $484 million to shareholders, comprised of $225 million of share repurchases and $259 million in dividends during the quarter. For the full year, Delta returned $3 billion to shareholders, including $2 billion of share repurchases and $980 million in dividends.

"Strong cash generation continues to set Delta apart and enables consistent reinvestment in the business while maintaining cash returns to owners at 70% of free cash flow," added Jacobson. "We expect to generate free cash flow of $4 billion again this year, putting us on track to deliver a three-year cumulative free cash flow of over $10 billion by the end of 2020."

Strategic Highlights

In 2019, Delta achieved a number of milestones across its five key strategic pillars.

Culture and People

  • Delta people earned $1.6 billion in profit sharing and $87 million in Shared Rewards, recognizing the outstanding performance of Delta's 90,000 employees through 2019.
  • Contributed over $60 million and 800,000 volunteer hours in 2019 as part of Delta's commitment to the communities we serve. Introduced The Great Delta Give-Back, reinforcing commitment to the communities Delta serves around the world by providing employees an annual paid day of service.

Operational Reliability

  • Delivered 281 days of zero mainline cancellations and 165 days of zero system cancellations through 2019, an improvement of 12% and 15%, respectively, versus 2018.
  • Reached record completion factor in 2019 on a system and mainline basis, with mainline completion factor of 99.83%.
  • Carried an all-time record 204 million customers in 2019, 6% more than prior year with a record load factor of 86.3%.
  • Achieved 2% fuel efficiency improvement through fleet renewal and other initiatives. Delta also entered into an agreement with Gevo for 10 million gallons annually of sustainable aviation fuel.

Network and Partnerships

  • Strengthened global partnerships in all international entities with: the announcement of a strategic alliance with LATAM Airlines Group including completion of a tender offer to acquire a 20% equity stake; the equity investment in Hanjin-KAL the largest shareholder of Korean Air; approval by the U.S. DOT for anti-trust immunity for the expanded joint venture between Delta, Air France, KLM and Virgin Atlantic.
  • Announced a combination between Delta Private Jets and Wheels Up, a private aviation company, to create one of the world's largest owned and managed fleets of private aircraft, with over 190 aircraft and 8,000 customers in the combined company.
  • Extended Delta's global reach with new service between Amsterdam-Tampa, Boston-Edinburgh, Boston-Lisbon, Minneapolis-Mexico City, Minneapolis-Seoul, New York JFK-Bogota, New York JFK-Mumbai and Seattle-Osaka.

Customer Experience and Loyalty

  • Announced an 11-year contract renewal between Delta and American Express with contribution increasing from $4.1 billion in 2019 to nearly $7 billion by 2023, including a complete relaunch where cardholders will enjoy more ways to earn miles.
  • Added a record number of new SkyMiles Members in one year with the number of new Members increasing at more than triple the rate of just three years ago and added record 1.1 million new Delta American Express cardholders, marking the third consecutive year of more than one million new cardholders.
  • Debuted an industry-leading international Main Cabin experience designed by flight attendants to elevate and differentiate the customer experience on Delta featuring thoughtful touches like welcome cocktails, hot towel service, bistro-style dining and more.
  • Took delivery of 88 new aircraft including the A220-100 and A330-900neo, with in-flight entertainment, spacious overhead bins and memory foam cushions throughout the aircraft for additional comfort.
  • Released the updated FlyDelta app, providing automatic international check-in, integrated security wait times and the ability to pre-select meals in Delta One and domestic First Class.
  • Awarded the No.1 airline in Business Travel News Airline Survey for a record ninth consecutive year, sweeping all 11 categories.

Investment Grade Balance Sheet

  • Reported a 1.7x adjusted debt to EBITDAR ratio, toward the lower end of our long-term leverage ratio target of 1.5x to 2.5x adjusted debt to EBITDAR, which is expected to allow Delta to maintain investment grade ratings through a business cycle.
  • Completed a $1.5 billion unsecured debt offering through a mix of five- and 10-year notes at a blended rate of 3.24%, the lowest unsecured rates achieved by Delta for these lengths of maturity in its history. The proceeds from this offering were used to fund the acquisition of the 20% equity stake in LATAM Airlines Group.

I have collected and written details about 2019 financial year for delta airlines

Give thums up if u like the data i have presented

Thank you from Mona here....


Related Solutions

Access Delta Airline 10K Annual Report for the fiscal year ended December 31, 2019, Analyze financial...
Access Delta Airline 10K Annual Report for the fiscal year ended December 31, 2019, Analyze financial section Analyze weighted competitive strengths, opportunities and threat. Analyze the internal and external environment
Analyze Delta Airline 10K Annual Report for the fiscal year ended December 31, 2019 in terms...
Analyze Delta Airline 10K Annual Report for the fiscal year ended December 31, 2019 in terms of external, internal and value chain?
Consolidated Statement of Financial Position For the year ended 30 September 2019 2019 2019 2018 2018...
Consolidated Statement of Financial Position For the year ended 30 September 2019 2019 2019 2018 2018 ASSETS Note ZMW’000s USD’000s ZMW’000s USD’000s Non-current assets Goodwill 13 166,801 12,636 166,801 13,628 Property, plant and equipment 14 2,841,824 215,290 2,902,221 237,110 Investment in associate 15(e) 12,376 938 15,412 1,259 Deferred tax asset 10(e) 56,525 4,282 47,854 3,910 3,077,526 233,146 3,132,288 255,907 Current assets Biological assets 16 170,417 12,910 181,674 14,843 Inventories 17 941,159 71,300 639,811 52,272 Trade and other receivables 18 98,025...
Delta airlines: Internal analysis of firms value chain. Identify which value chain activities are creating value...
Delta airlines: Internal analysis of firms value chain. Identify which value chain activities are creating value for the firm.
1. The budget committee is an important part of the budgeting process. Discuss the activities of...
1. The budget committee is an important part of the budgeting process. Discuss the activities of the budget committee. 2. When preparing the budgeted balance sheet, where would you look to find the information for the ending cash balance? Explain. 3. Why is it a good idea to create a "Budgeting Assumptions" tab when creating a master budget in Microsoft Excel (or other spreadsheet)?
discuss important financial reporting issues; accounting estimations and valuations for various operating activities. For example, they...
discuss important financial reporting issues; accounting estimations and valuations for various operating activities. For example, they discuss in-depth implication of revenue recognition, sales allowances, deferred revenue (unearned revenue we learned from previous modules), foreign currency exchange fluctuations on the revenues, and account receivables, etc. These topics have direct impacts on our income statements, and have significant implications for earnings management. Please discuss the main topics and focus on how each item would affect financial reporting in general.
Steiner College’s statement of financial position for the year ended June 30, 2019, is presented here....
Steiner College’s statement of financial position for the year ended June 30, 2019, is presented here. Steiner is a private college.   STEINER COLLEGE   Statement of Financial Position   June 30, 2019   (amounts in thousands) Assets Cash and cash equivalents $ 734 Short-term investments 7,666 Tuition and fees receivable (net of doubtful accounts of $12) 230 Pledges receivable (net of doubtful accounts of $280) 5,872 Prepaid assets 1,364 Property, plant, and equipment (net of accumulated depreciation of $104,240) 281,404 Investments (at fair...
Delta Corporation has financial pretax income of $850,000 for 2019. There are three differences between financial...
Delta Corporation has financial pretax income of $850,000 for 2019. There are three differences between financial pretax income and taxable income. Unearned revenue causes taxable income to be greater than financial income by $80,000. It reverses equally over the next two years. Depreciation on the tax return is $120,000 higher than the amount reported on the financial statements. The difference reverses equally over the next three years The financial statements include $20,000 interest earned on municipal securities. The companies tax...
A financial institution has the following portfolio of options a stock: Type Position Delta of Option...
A financial institution has the following portfolio of options a stock: Type Position Delta of Option Gamma of Option Vega of Option Call −2,000 0.60 2.5 0.8 Call    −200 0.80 0.6 0.2 Put −2,000    −0.70 1.1 0.9 Call −500 0.70 1.8 1.4 In EXCEL file answer the questions below, An option is available with a delta of 0.5, a gamma of 2, and a vega of 1.5. (a) What position in the traded option and in the stock...
1. What Would You Do? Case Assignment Delta Airlines Headquarters Atlanta, Georgia All airlines and airports...
1. What Would You Do? Case Assignment Delta Airlines Headquarters Atlanta, Georgia All airlines and airports lose bags. After all, they must handle thousands of bags per day, sort through the bags on each plane like a 500-piece puzzle dumped on the table from a just-opened box, and then rush them to the right connecting planes or baggage carousels. The challenging logistics, however, don’t make up for the impact of delays on passengers. There’s the Rabbi flying to Israel, whose...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT