Delta Air Lines Earnings Fall On Higher Fuel Costs

Delta Air LinesBy Brian from Toronto, Canada (Delta 767Uploaded by Altair78) [CC BY-SA 2.0], via Wikimedia Commons

Delta Air Lines, Inc. (NYSE:DAL) Inc reported a sharp fall in its fourth-quarter earnings owing in part to higher fuel costs and charges to restructure its domestic fleet, along with super storm Sandy.

Delta Air Lines Earnings Fall On Higher Fuel Costs

Delta posted a profit of $7 million, or 1 cent per share against 425 million, or 50 cents, a year earlier. Excluding items such as domestic fleet restructuring, early debt retirement and mark-to-market losses on fuel hedges, earnings per share were 28 cents. Revenue for the quarter rose by 2.4% to $8.6 billion. Analysts polled by Thomson Reuter have forecasted per-share earnings of 28 cents on a revenue of $8.6 billion. Operating margin for the airline dropped to 4.1 percent from 8.6 percent, against earlier forecasts of 4 percent to 6 percent.

For the first-quarter of 2013, the company expects a 4 percent to 6 percent increase in the revenue, against a 2 percent estimation of analyst. The investment in operations and capacity discipline will drive the revenue growth, as per the company.

“Our December quarter profit caps off a successful 2012 for Delta Air Lines, Inc. (NYSE:DAL) with strong financial results, industry-leading operational performance, and across the board improvements in customer satisfaction.  I want to thank our employees and I look forward to recognizing them next month with $372 million of profit sharing for 2012,” said Richard Anderson, Delta’s chief executive officer.  “We enter 2013 as a stronger airline, with initiatives in place to build on our 2012 success.  In the year ahead, we will advance our position around the world and continue to build a better airline for our shareholders, customers and employees.”

The second-largest U.S. carrier by traffic has been resorting to capacity cuts to retain pricing power. The company is working on a $1 billion cost cutting plan from its structural costs, by revamping its domestic fleet, maintenance savings and productivity initiatives.

The US carrier said it expected better earnings in the fourth quarter, despite an increase in its nonfuel costs, much higher than expected. Delta Air Lines, Inc. (NYSE:DAL) also expects inflationary pressure to continue in 2013.

“Delta’s results this quarter are remarkable in light of the $100 million negative impact Superstorm Sandy had on our airline and refinery operations,” said Paul Jacobson, Delta’s chief financial officer.  “We have generated $4 billion in free cash flow over the past three years, and we expect to build on that momentum in 2013 with the additional benefits of further debt reduction and $1 billion of structural cost initiatives.”

A report from Streneagee says the earnings were ahead of its estimates, mainly due a figure of  $100 million, for costs related to Super-storm Sandy. The first quarter outlook also exceeds the estimates from Streneagee on revenues, fuel and unit costs

Overall traffic rose marginally by 0.7 percent and capacity decreased 1.3 percent. Load factor, or the percentage of seats filled, jumped to 83.3 percent from 81.7 percent a year ago.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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