Can Delta Air Lines, Inc. Soar in a Concentrated Airline Industry?

Can Delta Air Lines, Inc. Soar in a Concentrated Airline Industry? by Estimize 

Delta Air Lines (DAL) Industrials – Airlines | Reports January 19, Before Market Opens

Key Takeaways

Exclusive: York Capital to wind down European funds, spin out Asian funds

Jeffrey Aronson Crossroads CapitalYork Capital Management has decided to focus on longer-duration assets like private equity, private debt and collateralized loan obligations. The firm also plans to wind down its European hedge funds and spin out its Asian fund. Q3 2020 hedge fund letters, conferences and more York announces structural and operational changes York Chairman and CEO Jamie Read More

  • The Estimize consensus calls for EPS of $1.22 and revenue of $9.589 billion, with EPS estimates slightly higher than the Wall Street consensus
  • Delta impressed shareholders after a record Q3 2015 and is poised for a profitable fourth quarter thanks to declining fuel costs
  • Despite an improving bottom line, Delta and other airlines are coping with currency headwinds and declining
  • What are you expecting for DAL? Get your estimate in here!
Delta Air Lines
Delta Air Lines
Delta Air Lines
Delta Air Lines

As airlines prepare to report fourth quarter earnings next week, the industry is in a position to report record profits. Even in a highly competitive industry, airlines have remained competitive thanks in large part to plunging oil prices. Recently, airlines made headlines when three of the largest U.S. airlines announcing they will hike prices for the first time in 6 months.
On Tuesday, Delta (DAL) will be the first airline to report fourth quarter earnings. After impressing shareholders in Q3 2015, Delta  is poised for a repeat performance come this Tuesday. With oil prices expected to remain weak for the foreseeable future, Delta should continue to experience strong revenue growth in the short term. The Estimize consensus calls for EPS of $1.22 and revenue of $9.589 billion, with EPS estimates 2% higher than the Wall Street consensus. Compared to Q4 2014, this represents a 56% increase in EPS and flat revenue growth.  The massive savings from fuel costs has been a huge blessing which represents a massive portion of the airline’s operating expenses. Consequently, Delta has increased their efforts to return value to shareholders through these promising times. During the third quarter, Delta returned over $500 million to its shareholders through dividends and buybacks. Despite improving travel demand, the airline industry has been plagued with declining passenger unit revenue (PRASM, a measure of unit revenue) and currency headwinds.
The airline industry has been one of the biggest beneficiaries of declining oil prices and fuel costs. Thanks to a volatile oil market, Delta posted a record Q3 and is expected to continue their upward trend. Besides oil, Delta is taking on new initiatives to boost revenue and differentiate itself in a concentrated market. The airline aims to invest $2 to $3 billion per year to improve customer satisfaction and convenience. This includes  enhancing services both in the air and on the ground, including improving fleet structure, amenities, products and on-board technology. Even though airline traffic and revenue has improved, Delta has been negatively impacted by currency headwinds and diminishing per unit passenger revenue. This comes as passengers are spending less on baggage fees and on-board amenities per mile traveled. That being said, Delta and the airline industry can continue to be viewed favorably until the oil market stabilizes.

Do you think Delta Air Lines can beat estimates? There is still time to get your estimate in here!

Photo Credit: Christian Junker