Is Delta Airlines Too Optimistic About Its Revenue Growth Prospects In 2020?
A Quick Look at Delta Airlines’ Revenues
Delta Airlines’ reported $43.5 billion in Total Revenues for full-year 2018. It includes three revenue streams:
- Passenger Revenue: $40 billion in FY2018 (90% of Total Revenues). It represents income from the sale of air tickets and other ancillary offerings for the company’s mainline and affiliate carriers. If a ticket is sold and travel is yet to happen, the company recognizes income from such tickets as air traffic liability. Due to the complex structure of ticket pricing, cancellation and rescheduling, a certain portion of the liability is recognized as passenger revenues based on recognized historical patterns.
- Cargo Revenue: $1 billion in FY2018 (2% of Total Revenues). It represents income freight and mail services.
- Other Revenue: $4 billion in FY2018 (8% of Total Revenues). It comprises of the sale of loyalty points to credit card companies.
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Delta Airlines’ Total Revenue has grown by 13% from $39.5 billion in 2016 to $44.4 billion in 2018, and is expected to reach $48.4 billion in 2020
- In 2019, the company’s Passenger division is expected to report revenue growth of around 5.7%, driven by growing passenger traffic.
- Passenger Revenues include air ticket sales, income from loyalty rewards, and other ancillary services such as baggage fees.
- Air ticket sales are driven by available seat miles, passenger yield, and aircraft occupancy levels.
- In 2019, the company’s Cargo division observed sharp declines, primarily due to a weak demand for air cargo services. We expect
- Other Revenues comprise of loyalty points sales to credit card companies, income from aircraft maintenance and staffing services, and other miscellaneous services such as lounge accessibility.
- Other Revenues have remained relatively stable over the last few years and we expect it to continue growing with the Passenger revenues.
- As we detail in our interactive dashboard, despite steady improvements to each of these key metrics, Delta’s Revenues will be around $48.4 billion for full-year 2020
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