Delta Air earnings beat Wall Street estimates

Delta Air Lines Inc. has announced their quarterly profit and the figure was better than expected. The company also forecasted their 2nd quarter passenger unit revenue to grow by one to three percent. Delta Air Lines shares surged 1.9% to $46.13 in early trading following the announcement.

Last month, Delta reduced its operating margin forecast for the 1st quarter because of rising fuel and labor costs.

According to Zacks Investment Research, Wall Street was expecting earnings per share to be 73 cents per share. However, Delta Air reported adjusted earnings per share to be 77 cents.

Compared to last year’s first quarter, Delta’s net income dropped by 36.3% to $603 million. Total operating revenue also fell by 1.1% to $9.15 billion. Analysts forecasted it to be $9.18 billion.

Glen Hauenstein, Delta President, said, “We will keep our full-year capacity growth capped at 1 percent to support this unit revenue momentum and the company’s return to margin expansion.”

The company noted that last month was the first month since November 2015 that they had positive passenger unit revenue. Delta expects this figure to remain positive for the rest of 2017. Last year, unit revenues dropped throughout the industry because of lower average fares and higher capacity.

Helane Becker, Cowen & Co. analyst, said, “Investors may view the company’s second quarter passenger unit revenue guidance as ‘aggressive’ given recent guidance missteps, but the guidance was still much better than expectations especially when considered the storm impact.”

Earlier this month, Delta had to cancel around 4,000 flights because of the hazardous weather in Atlanta. Ed Bastian, Chief Executive Officer, said, “We hold ourselves to a high standard, and we apologize to all our customers who were impacted by last week’s events.”

Ned Walker, Delta spokesman, said that Gil West who is Delta’s chief operating officer would perform “a complete deep dive across the organization to find out lessons learned from all the different divisions.”

The impact of it would be that they have to reduce their 2nd quarter pre-tax income by $125 million. Their forecast for their 2nd quarter operating margin is within a range of 17 to 19 percent.

According to Delta’s chief financial officer, Paul Jacobson, the first quarter of the year would likely be the quarter that applies the most pressure on profit margins because of rising fuel costs. Jacobson said in a statement, “With an improving revenue profile and further improvement as our cost growth moderates in the second half, we are on track to expand margins for the balance of the year.”

Delta President Glen Hauenstein, Delta is expecting a fast recovery for its pricey last minute tickets that business travelers usually avail of. He described those fares are now “moving in the right direction.”

According to a Wall Street Journal report, Delta is the most generous airline when it comes to compensating passengers for lack of seats in 2016. Among the airlines, it also had the highest rate of overbooked spots.

Delta Airlines is based in Georgia, Atlanta.

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