Is Delta Airlines Too Optimistic About Its Revenue Growth Prospects In 2020?

by Trefis Team
Delta Air Lines
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Delta Airlines (NYSE: DAL) recently released its revenue guidance for 2020, with the company expecting its top line to expand by 4-6% despite growing fears of a macroeconomic slowdown in the U.S. Trefis highlights the key drivers of Delta Airlines’ Revenues in an interactive dashboard along with our forecast for 2019 and 2020, and we believe that revenue growth for the year is likely to aroune 3.4% – below the company’s guidance range. Our estimate for the company’s revenue growth rate is based on our detailed forecast for each of Delta’s revenue streams, parts of which are highlighted below.

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.

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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