Delta Air Lines, Inc. (NYSE:DAL) released its latest earnings report this morning, posting adjusted earnings of $1.20 cents per share on $11.18 billion in revenue. Analysts had been expecting earnings of $1.18 per share on $11.1 billion in revenue.

Reported earnings were 42 cents per share.

Delta Air Lines, Inc. (DAL) Edges Out Earnings Estimates

Delta sees record profit

Pretax income for the September quarter was $1.6 billion, excluding items, an increase of $431 million year over year. Net income was $1 billion, while operating margin was 15.8%, excluding items. GAAP pretax income was $579 million, while GAAP operating margin was 7.5% and net income was $357 million.

This quarter’s results include $384 million in profit sharing for employees. The airline generated $910 million in free cash flow during the third quarter. Delta used its quarterly cash generation to cut down its adjusted net debt to $7.4 billion and pay $325 million to shareholders through share buybacks and dividends.

“With another record profit, solid margin expansion and nearly $1 billion of free cash flow, Delta’s results are consistent with high-quality S&P 500 industrials,” said Delta CEO Richard Anderson in a statement. “While we have more work ahead of us to achieve our long-term financial goals, we expect a record fourth quarter of 2014 with an operating margin of 10-12%.

Breaking down Delta’s earnings report

Delta Airlines reported a 7% increase in operating revenue year over year. The airline reported a 3.7% increase in traffic and a 3.2% increase in capacity. Passenger revenue rose by 6% to $522 million. Passenger unit revenue rose 2.4%, including a 1.9% yield improvement. Seat-related products and merchandising boosted revenues by almost $50 million.

Cargo revenue rose 7% due to greater freight volumes and yields. Delta reported a 14% increase in Other revenue driven by revenues from SkyMiles, the company’s joint venture and third-party refinery sales.

Delta looks forward

Management expects a “solid” revenue environment for the December quarter. They project a 0% to 2% increase in unit revenues and “another quarter of good top line growth, margin expansion and free cash flow.” They also expect to continue improving margins by speeding up their restructuring plan in their Pacific network and “recalibrate” their capacity levels and see benefits from their Latin network investments.