Why Delta Air Lines’ Earnings Weren’t as Rough as They Looked

Why Delta Air Lines’ Earnings Weren’t as Rough as They Looked


Delta Air Lines, based in Atlanta, once again managed to beat the market’s expectations in the third quarter, despite the outages caused by hurricanes Irma and Harvey. Revenues grew by 5.5% year on year to $11.1 billion. Operating profit slipped 11 percent yoy to $1.8 billion, which also topped market forecasts. Thus, the operating margin was 16.2%. Surprisingly lower tax costs eventually supported net earnings per share, which dropped only 8% yoy to $1.57. The market forecasted a decline to $1.52.

Unfortunately, unit revenue per passenger (PRASM) grew by only 1.9% yoy, which is far behind the management’s plans. Those in the previous results reported a growth rate of 2.5 to 4.5%. Transport capacity grew by 1.6% year-on-year, compared with only 0.4% yoy increase in the previous quarter. For the aeronautical sector, which has long been troubled by the capacity problem, such an improvement is a hope for good. Cost items were significantly better this quarter compared to the previous ones. CASM-Ex (costs by available seat miles) rose by 4.8% yoy. In addition, this figure includes the cost of flights canceled following Irma and Harvey.

For the next quarter, management expects an operating margin of between 11% and 13%. Passenger unit revenue (PRASM) is predicted to grow between 2% and 4% year-on-year and CASM-Ex unit costs are forecasted to remain unchanged or even slid by 1% yoy.

To sum up, the impacts of Hurricanes Irma and Harvey have been minimized and their effect on results has estimated the market correctly. The stock made little movement despite the positive outlook for the next quarter in both sales and costs.

The net profit of one of the largest American air carriers, Delta Air Lines, declined by 20% in the first nine months of 2017 compared to the same period last year – to $3.005 billion, the company said.

Diluted earnings per share were $4.13 compared to $4.92 a year earlier. The operating profit of the air carrier decreased by 17% – to $4.920 billion. The company’s operating revenue for the past nine months increased by 3%, to $30.999 billion.

The financial results of the company in the quarter were affected by numerous hurricanes in the US and the earthquake in Mexico, according to Delta.

The airline Delta Air Lines began operations in 1929. The number of employees, as of June 30, 2017, is 87.263 thousand people worldwide. The company serves about 180 million people annually.

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I cover technology, utilities and biotechnology for Markets Morning, and I help out occasionally with other industry sectors. I've written about investment and personal finance topics for more than 20 years from a lowly copywriter to editor-in-chief, so I've done a little bit of everything. For what it's worth, I have a BA from Duke University and an MBA from Rollins College. I'm married with one daughter, and that's worth more than everything else put together.