The June traffic for the second largest U.S. airline,
Delta Air Lines
), inched up 0.4% year over year on growing business travel demand
and flight expansion in the New York market. The addition of novel
features to its services and the introduction of new products
contributed to the rise in traffic.
Airline traffic is customarily measured in billions of revenue
passenger miles. On a year-over-year basis, consolidated capacity
(or available seat miles) fell 1.7% while the load factor
(percentage of seats filled by passengers) improved 180 basis
points (bps) to 88.1%.
Domestic traffic grew 0.9% year over year on a 120-bp expansion
in load factor, which partly offset capacity reduction of 0.5%.
International traffic slid 0.3% year over year due to a 3.3%
decline in capacity that partially offset a 260-bp growth in load
factor. Pacific and Latin America remained strong contributors,
with traffic climbing 7.3% and 6.2%, respectively.
Passenger revenue per available seat mile (PRASM) rose 8% year
over year and fuel price was $3.29 per gallon for June.
Last month, Delta, which competes strongly with
United Continental Holdings Inc.
Southwest Airlines Co.
), had projected fuel costs of $3.37 per gallon for the second
quarter, up from the previous forecast of $3.28 per gallon. On a
non-GAAP basis, operating margin is expected in the range of 8-10%
and consolidated unit cost, excluding fuel, is projected grow 3-4%
year over year.
Moreover, the company foresees a $155 million loss from fuel
hedging strategies in the second quarter due to the drop in fuel
prices. Delta Air Lines was 70% hedged for the second quarter at a
jet fuel price of $3.05-$3.40 per gallon using collars and call
spreads. As a result, the company expects to record operating loss
in the quarter with negative 1% operating margin after accounting
for the hedges and other special charges.
For the second quarter, the Zacks Consensus Estimate for Delta
is 67 cents, which is lower by 7 cents and 14 cents over the last 7
and 30 days, respectively. But the Estimate represents substantial
growth of 56.78% from the year-ago quarter.
We are currently maintaining our long-term Neutral
recommendation on Delta Air Lines.
DELTA AIR LINES (DAL): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis Report
UNITED CONT HLD (UAL): Free Stock Analysis
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