OREANDA-NEWS. Delta Air Lines (NYSE: DAL) today reported financial results for the March 2015 quarter.  Key points include:
  • Delta's adjusted pre-tax income1 for the March 2015 quarter was \$594 million, an increase of \$150 million over the March 2014 quarter on a similar basis.  Delta's adjusted net income for the March 2015 quarter was \$372 million, or \$0.45 per diluted share, and its adjusted operating margin was 8.8 percent.
  • On a GAAP basis, Delta's March quarter pre-tax income was \$1.2 billion, operating margin was 14.9 percent and net income was \$746 million, or \$0.90 per share. 
  • Results include \$136 million in profit sharing expense, recognizing Delta employees' contributions toward meeting the company's financial goals.
  • The company used its strong cash generation in the quarter to return \$500 million to shareholders through dividends and share repurchases and to make \$904 million in pension contributions.

"Delta's business is performing well, producing the best March quarter, both operationally and financially, in Delta's history," said Richard Anderson, Delta's chief executive officer.  "While the strong dollar is creating headwinds with international revenues, it also contributes to the lower fuel prices which will offset those headwinds with over \$2 billion in fuel savings this year.  We are looking at June quarter operating margins of 16-18 percent with over \$1.5 billion of free cash flow—these record results and cash flows show that the strong dollar is a net positive for Delta."

Capacity Actions in Light of Strong Dollar and Lower Energy Prices

To address currency headwinds, Delta plans to reduce its international capacity by 3 percent year over year for the winter schedule.  These international reductions, combined with 2 percent domestic growth, will result in flat system capacity for the December quarter.  Capacity adjustments will be focused on markets that have been most affected by the strong dollar and markets where demand has been negatively impacted by the decline in oil prices.  Key actions for the December quarter will include a 15-20 percent reduction in service from Japan, a 15 percent reduction to Brazil, a 15-20 percent reduction to Africa, India and the Middle East, and suspension of service to Moscow for the winter season. 

Revenue Environment

Delta's operating revenue improved 5 percent, or \$472 million, in the March 2015 quarter compared to the March 2014 quarter.  Traffic increased 3.6 percent on a 5.0 percent increase in capacity, which includes 2 points due to capacity removed in the first quarter of 2014 as a result of winter storms.  Foreign exchange pressured revenue by \$105 million for the quarter.

  • Passenger revenue increased 3 percent, or \$246 million, compared to the prior year period.  Passenger unit revenue (PRASM) decreased 1.7 percent year over year primarily driven by 1.5 points of negative foreign exchange impact.
  • Cargo revenue was unchanged from the prior year period as higher volumes offset lower yields.
  • Other revenue increased 22 percent, or \$226 million, driven by SkyMiles revenues and third-party refinery sales.