Delta Airline posts $1.85bn profit in Q2 2017

 

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…shareholders get $748m

 

By Sade Williams

Delta Air Lines has reported financial results for the June quarter 2017.  Highlights of those results, including both generally accepted accounting principles (GAAP) and adjusted metrics, are below and incorporated here.

 

Adjusted pre-tax income for the June 2017 quarter was $1.85 billion, a $172 million increase from the June 2016 quarter, primarily driven by higher revenue.

 

Delta recorded a June quarter 2017 adjusted operating margin of 18.4 percent.  It delivered these results despite a $125 million negative impact from the operational disruption following severe storms in Atlanta in early April.

 

“The June quarter ranks among the best in Delta’s history as our people delivered top financial, operational, and customer satisfaction results – and it is an honor to recognize that performance with an additional $338 million toward our 2017 profit sharing,” said Ed Bastian, Delta’s chief executive officer.

 

He noted further that , “While 2017 is a transition period for Delta, we are encouraged by the improvement in unit revenues, leading to increasing conviction in our ability to expand margins as we move through the back half of the year.”

 

Revenue Environment

 

Delta’s record operating revenue of $10.8 billion for the June quarter was up $344 million versus prior year, despite a $115 million headwind from April‘s operational disruption.

 

Passenger revenue increased $261 million, including $100 million from Delta’s Branded Fares initiatives.  Passenger unit revenues increased 2.5 percent on 0.4 percent higher capacity.

 

Cargo revenue increased 11 percent, driven by higher volumes in freight and mail.  Other revenue increased 5 percent primarily due to higher SkyMiles revenue and third-party refinery sales.

Ed Bastian, Delta CEO

Ed Bastian, Delta CEO

“The June quarter marked Delta’s return to unit revenue growth after two and a half years. This improvement resulted from a strengthening demand environment and our commercial initiatives to provide customers more choice, an innovative experience, and a broader global network.

 

“We expect this momentum to continue in the September quarter, with passenger unit revenue growth of 2.5 to 4.5 percent as we focus on driving a sustainable revenue premium to the industry”, said Glen Hauenstein, Delta’s president.

 

Cost Performance

 

Adjusted fuel expense4 decreased $325 million compared to the same period in 2016 as prior year hedge settlements offset higher market fuel prices.  Delta’s adjusted fuel price per gallon for the June quarter was $1.66, which includes $0.01 of benefit from the refinery.

 

CASM-Ex, including profit sharing increased 7.3 percent for the June 2017 quarter compared to the prior year period.  Normalized CASM-Ex, including profit sharing increased 5.5 percent versus the prior year period, driven by employee wage increases, product investments, and 1 point of pressure from April’s operational disruption.

 

Interest expense increased $10 million year-over-year from debt issuances in the March quarter used to fund Delta’s defined benefit pension liabilities.

 

“The June quarter represented the peak for non-fuel cost pressures this year and we expect our CASM trajectory to moderate to approximately 2 percent for the September quarter as we annualize product investments, improve productivity through upgauging and better asset utilization, and lap one-time costs from last August’s technology outage.

 

“Our cost foundation is an essential component of sustainable performance, allowing the benefits of our commercial initiatives to drive margin improvements in the future”, said Paul Jacobson, Delta’s chief financial officer.

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