Delta sees strong corporate demand continue in 1Q2019 and its domestic net promoter score hits 50%. Will these gains continue?

15 April, 2019

Forecasts of softening economy and continuing trade tensions with China have done little to dime Delta Air Lines’ corporate demand, and the first quarter of this year was no different. The airline’s topline corporate revenues grew 8% year-on-year in 1Q2019, and in its most recent corporate travel survey, 90% of travel managers expect to maintain or increase their travel spend in the second quarter of this year.

“This is a record for our June quarter survey,” Delta president Glen Hauenstein recently told analysts and investors. In the US domestic market, Delta’s corporate revenues increased 10% year-on-year in 1Q2019 on strong volumes and a 2% improvement in average corporate fares, said Mr Hauenstein. However, he cautioned that “leisure trends were choppy, but improved as the quarter progressed”.

Looking ahead into the second quarter, Mr Hauenstein stated that corporate demand in the US domestic market remains strong, and leisure is strengthening as the peak US summer travel season nears.

At the beginning of 1Q2019, Delta cited some headwinds in the trans-Atlantic market, and its unit revenues in that geographic entity fell 2.6% year-on-year while yields declined 2.3%. But as the summer travel season kicks in, Delta expect the trans-Atlantic “to return to unit revenue growth as demand shifts to US point of origin in the summer season and corporate trend remains strong,” Mr Hauenstein concluded.

Additionally, Delta’s domestic net promoter score has averaged 50% to date in 2019, which is the baseline number that will trigger an evaluation by the company over the cost benefits of attempting to grow that metric.

During the last couple of years, the airline has touted its progress in increasing its net promoter score (NPS). In late 2017 Delta’s net promoter score was 41.5% compared to 20% the company posted in 2011. Its average NPS in 2018 was 44%, which was roughly a three point increase from 2017.

In a recent 1Q2019 earnings discussion with analysts and investors, Delta CEO Ed Bastian stated the airline’s average domestic net promoter score in 2019 had averaged 50%, which was a seven point increase year-on-year.

Previously, Delta has stated its ultimate net promoter score target is around 50, and that once its domestic score reaches that target, the company would evaluate the cost benefits of continuing grow its net promoter metrics.

Airlines generally don’t talk about the costs associated with growing their respective net promoter scores, but now that Delta has reached the threshold where it needs evaluate those costs, it will be interesting to see if touts NPS progress in the future.