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Delta Air Lines September Traffic Rises Amid PRASM Worries

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Airline behemoth Delta Air Lines Inc.DAL witnessed an increase in air traffic in the month of September, when traffic - measured in revenue passenger miles (RPMs) - totaled 17.36 billion. This figure reflects a 2.4% increase from 16.95 billion recorded a year ago.

On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) inched up 0.9% to 20.4 billion. Meanwhile, the load factor or percentage of seats filled by passengers climbed 130 basis points to 85% as traffic growth outpaced the rise in capacity. The company registered a completion factor of 100%, with 90.5% of its flights on schedule.

In the first nine months of 2015, Delta generated RPMs of 160.1 billion (up 3.3% year over year) and ASMs of 188.6 billion (up 3.8% year over year). Load factor came at 84.9%, down 40 basis points on a year-over-year basis.

However, Delta witnessed a 5% drop in PRASM (passenger revenue per available seat mile: a measure of unit revenue) in the month mainly due to the strength of the U.S. dollar. Moreover, lower surcharge rates in international markets and low average airfare in the U.S. further affected PRASM growth.

Third Quarter Guidance Tweaked

For the third quarter of 2015, the carrier now expects operating margin in the range of 20% to 21% (old guidance: 19% to 21%). The estimated fuel price per gallon, including taxes and hedges, is now expected at $1.80 to $1.85 (previous guidance: $1.90 to $1.95). System capacity is still expected to increase approximately 3%.

Unit revenue is now projected to decline in the band of 4.5% and 5.5% (instead of 4.5% to 6.5% projected previously) mainly due to a strong dollar. Despite the favorable tone of the guidance, it failed to find favor with the investors. Consequently, the stock declined 1.19% to $44.87 on Oct 2. The carrier will report its third-quarter 2015 earnings on Oct 14.

Job Cuts in Sight?

According to a Bloomberg report, Delta intends to trim its "office workforce" across the globe in an attempt to boost productivity. The axe will apparently fall on management and salaried employees. According to the report, while front-line workers on planes will not be affected, certain employees in the human resources and communications departments might be dismissed. We expect investors to remain focused on further updates on the issue.

Zacks Rank

Delta currently sports a Zacks Rank #1 (Strong Buy). Investors interested in the airline space may also consider JetBlue Airways Corporation JBLU , Alaska Air Group, Inc. ALK and Ryanair Holdings RYAAY . All the three carriers share the Zacks Rank with Delta.

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RYANAIR HLDGS (RYAAY): Free Stock Analysis Report

JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report

DELTA AIR LINES (DAL): Free Stock Analysis Report

ALASKA AIR GRP (ALK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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