Diverse Client Base Limits Delta's Exposure To Sector-Specific Shocks

Delta president Ed Bastian during a presentation this week detailed corporate spending levels that shed light on the current demand environment and revealed the make-up of carrier's client base.

A quick look at data shared Tuesday at the J.P. Morgan Aviation, Transportation and Defense Conference showed strong corporate demand at Delta, with total year-to-date revenue from corporate clients up 10 percent from the same period last year.

However, Delta for the fourth quarter of 2011 reported a 15 percent jump in corporate revenue. Bastian addressed the apparently softer first-quarter growth by explaining that Delta's capacity is down about 4 percent year to date versus the year-earlier period, so there are fewer seats to sell. Furthermore, year-over-year corporate revenue comparisons incorporate a period last year when overall corporate travel was recovering at a healthy clip and airlines were enjoying renewed pricing power. "Tough comps," as airline executives often say.

Either way, double-digit percentage growth is nothing to scoff at, especially given industry rumblings of a potential demand decline. Time will tell whether that actually occurs, but Delta so far isn't seeing it. "We have continued to see bookings stay strong in first part of this year," Bastian said.

Executives at other airlines this year have shared similar sentiments and reported similarly strong corporate revenue gains, so what's perhaps more interesting about Delta's figures is its breakdown of spending by client segment. The carrier in the past has shared with analysts and media some color on segment-specific trends, but I hadn't before seen such a complete breakdown.

Bastian noted, and the data confirm, the diversity of the carrier's client base, shielding Delta from sector-specific shocks. "Certainly, we all hear about the problems on Wall Street, the problems in the eurozone and the problems in the financial sector," he said. "The areas of the business that are most directly tied to us__most specifically the banking sector__is only 3 percent of our total corporate revenue pie. As a result of that, those growth rates and the fact that they're not growing at the same level as the full portfolio does not provide as much exposure or vulnerability to Delta."