Delta Air Lines, Inc. Slips After Earnings

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Delta Air Lines released its latest earnings report before opening bell, posting adjusted earnings of $1.27, a 22% year over year increase, per share on $10.71 billion in revenue, a 0.8% increase year over year. Analysts had been looking for earnings of $1.21 per share and $10.64 billion in revenue.

Key metrics from Delta’s earnings report

Net earnings were $1.83 per share, compared to last year’s 94 cents per share. Operating revenue edged upward by 1%, including a negative impact of $160 million due to pressures from foreign currencies. Those pressures cut unit revenues by about two points. Delta Air Lines reported a 4.6% decline in passenger unit revenues and a 3.9% decline in yields. Delta’s Branded Fares products added $56 million to passenger revenues, while its agreement with American Express added $60 million to its revenue.

Domestic passenger revenue rose 4.9% to $4.7 billion, while Atlantic passenger revenue fell 6.9% to $1.55 billion and Pacific passenger revenue declined 11.8% to $722 million. Passenger revenue in Latin America fell 0.5% to $601 million. Regional passenger revenue fell 7.8% to $1.552 billion, while consolidated passenger revenue dipped 1.4% to $9.14 billion. Cargo revenue fell 10% to $207 million.

Delta President Ed Bastian said in a statement:

“Our commercial initiatives continue to gain traction in the marketplace and we will produce summer margins in excess of any achieved in our history. However, unit revenue growth is an important component of our long-term plan to expand margins.  We continue to project flat system capacity growth for the fourth quarter of 2015 – a level in line with current demand expectations, which should put the business on the right trajectory to stem the erosion in unit revenues by the end of the year.”

Delta Air Lines provides guidance

Delta management expects unit revenue to decline by between 4.5% and 6.5% year over year for the third quarter. They believe Delta’s significant savings on fuel will enable the company to grow third quarter earnings per share by more than 30%. They’re expecting an operating margin of between 19% and 21% and a fuel price, including taxes, hedges and impacts from refineries, of between $1.90 and $1.95 per gallon. They’re planning a 3% year over year decline in system capacity.

The airline returned $1 billion to shareholders through buybacks and dividends during the second quarter.

As of this writing, shares of Delta Air Lines were down 1.86% at $42.85 per share.

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