Delta airline records S172m in June quarter

Delta Airlines has announced financial results

The airline reported that its adjusted pre-tax income for the June 2017 quarter was $1.85 billion, an increase of $172 million from the same income in the June 2016 quarter, primarily driven by higher revenue.

Delta recorded a June quarter 2017 adjusted operating margin of 18.4 percent. Delta delivered these results despite a $125 million negative impact from the operational disruption following severe storms in Atlanta in early April.

“The June quarter ranks among the best in Delta’s history as our people delivered top financial, operational, and customer satisfaction results – and it is an honor to recognize that performance with an additional $338 million toward our 2017 profit sharing,” said Ed Bastian, Delta’s chief executive officer.

“While 2017 is a transition period for Delta, wee are encouraged by the improvement in unit revenues, leading to increasing conviction in our ability to expand margins as we move through the back half of the year.”

Delta’s record operating revenue of $10.8 billion for the June quarter was up $344m versus prior year, despite a $115 million headwind from April‘s operational disruption.

Passenger revenue increased $261m, including $100 million from Delta’s Branded Fares initiatives. Passenger unit revenues increased 2.5 percent on 0.4 percent higher capacity.

Cargo revenue increased 11 percent, driven by higher volumes in freight and mail. Other revenue increased 5 percent primarily due to higher SkyMiles revenue and third-party refinery sales.

“The June quarter marked Delta’s return to unit revenue growth after two and a half years. This improvement resulted from a strengthening demand environment and our commercial initiatives to provide customers more choice, an innovative experience, and a broader global network,” said Glen Hauenstein, Delta’s president. “We expect this momentum to continue in the September quarter, with passenger unit revenue growth of 2.5 to 4.5 per cent as we focus on driving a sustainable revenue premium to the industry.”

Adjusted fuel expense4 decreased $325m compared to the same period in 2016 as prior year hedge settlements offset higher market fuel prices. Delta’s adjusted fuel price per gallon for the June quarter was $1.66, which includes $0.01 of benefit from the refinery.

CASM-Ex, including profit sharing increased 7.3 percent for the June 2017 quarter compared to the prior year period. Normalized CASM-Ex, including profit sharing increased 5.5 percent versus the prior year period, driven by employee wage increases, product investments, and 1 point of pressure from April’s operational disruption.

Interest expense increased $10m year-over-year from debt issuances in the March quarter used to fund Delta’s defined benefit pension liabilities.

“The June quarter represented the peak for non-fuel cost pressures this year and we expect our CASM trajectory to moderate to approximately 2 per cent for the September quarter as we annualize product investments, improve productivity through upgauging and better asset utilization, and lap one-time costs from last August’s technology outage,” said Paul Jacobson, Delta’s chief financial officer.

“Our cost foundation is an essential component of sustainable performance, allowing the benefits of our commercial initiatives to drive margin improvements in the future.”