Delta Air Lines, Inc. Edges Out Earnings Estimates

Delta Air Lines released the earnings results from its most recently completed quarter this morning, posting adjusted earnings of 45 cents per share on $9.39 billion in revenue. Analysts had been expecting earnings of 44 cents per share on $9.39 billion in revenue. In the same quarter last year, Delta posted revenue of $8.92 billion.

Reported earnings were 90 cents per share, compared to 25 cents per share last year.

Delta slashes international capacity

Delta management said they’re making adjustments to the airline’s capacity in order to deal with headwinds from fluctuations in foreign currencies. Specifically, they’re cutting the airline’s international capacity 3% compared to last year for the winter travel season.

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When combining that reduction with a 2% increase in domestic capacity though, capacity remains just about flat with last year. The capacity reductions will come in the markets that are feeling the effects of the strengthening U.S. dollar the most. Delta said included in their plans for the December quarter are reduction of 15% to 20% in Japan, 15% in Brazil, 15% to 20% in Africa, India and the Middle East, and suspension of service to Moscow.

Delta management added that lower fuel costs are offsetting those fluctuations, however, as Delta has saved more than $2 billion in fuel.

Key metrics from Delta’s earnings report

Delta posted a 3% increase in passenger revenue, which increased to $4.08 billion for the March quarter. Cargo revenue was flat with last year, while other revenue increased 22% due to higher revenues from the airline’s SkyMiles program and third party refinery sales.

The airline reported that adjusted fuel expenses increased $23 million due to the $1.1 billion in settled hedge losses, which offset the $23 million in lower fuel prices. Included in the hedge losses were $300 million in early contract settlements. The airline paid an average of $2.93 per gallon for fuel during the March quarter.

For the June quarter, Delta expects more than $1.5 billion in free cash flow and operating margins of between 16% and 18%.