Delta Air Lines propelled by lower fuel costs as revenue bombs

 
Billy Bambrough
Follow Billy
US-ECONOMY-TRANSPORT-AIRLINES-BIRDS
The oil price has dropped by more than 50 per cent since mid-2014 highs, holding down the price of fuel (Source: Getty)

Delta Air Lines, the oldest airline still operating in the US, has posted results in line with expectations, with a decline in revenue being offset by the low oil price.

The figures

The airline reported a 4.1 per cent increase in net earnings for the second quarter, climbing to $1.5bn (£1.1bn), or $2.03 per share.

Delta's revenue dropped 2.4 per cent to $10.45bn, just falling short of analyst expectations who had pencilled in sales of $10.49bn. The $260m decline included a $65m hit from negative foreign currency swings.

On the other side, total fuel costs fell 16.5 per cent to $408m on the same period a year earlier.

Read more: Airlines are going to spend around $5.2 trillion on 33,000 new planes

Its revenue passenger miles grew three per cent whereas available seat miles advanced 3.2 per cent.

However, passenger mile yield and passenger revenue per available seat mile recorded a drop of 4.7 per cent and 4.9 per cent respectively.

Delta also revealed it will reduce its winter capacity to fly to the UK by six per cent because the steep drop in the value of the pound could discourage travel after the UK vote to quit the European Union last month.

Looks like Delta didn't expect Carney to park his bazooka either.

Why it's important

The oil price – still down over 50 per cent from highs in the summer of 2014 despite the recent rebound – is set to continue to work well for airlines around the world.

Read more: Farnborough Airshow – These are the aircraft deals announced today

At Delta it's giving them ample opportunity to get their house in order and revenue growth back on track.

While much of the revenue decline was down to negative FX effects, slipping passenger unit revenue – the amount it makes for each person that gets on the plane – is a far more serious concern.

Delta shares – down 22 per cent this year – slid a further 0.2 per cent to $39.48.

Delta nosed ahead of United Continental in 2015 to become the nation’s number two airline behind American Airlines.

What Delta said

Delta's chief executive, Ed Bastian, said:

The Delta people again delivered another quarter of solid profitability, superior operational performance and great customer service, continuing to strengthen our brand and our foundation for the future.

As we look to the remainder of the year, the large year-on-year savings driven by lower fuel are largely behind us and it is important to achieving our long-term financial targets that we get unit revenues back to a positive trajectory.

In short

Low oil is good news for gas-guzzling airlines – but they need to use this time to get back on track.

Related articles