Delta posts a profit despite lower airfare
NEW YORK Lower airfares and rising salaries are putting a squeeze on Delta Air Lines.
Luckily for the airline, the price of jet fuel remains cheap and the Atlanta based carrier was able to report Thursday a third quarter profit of $1.26 billion, down 4 percent from the same period last year. airlines and Delta’s earnings could signal an end of an extraordinary run of record profits for the industry. The issue is that this era of cheap fuel isn’t going to last forever. airline to report earnings paid $1.50 for each gallon of jet fuel in the quarter, down from $1.89 during the same period last year. An oil refinery owned by Delta in Pennsylvania lost $45 million in the quarter, yet possession of the facility gives the airline a 3 cents per gallon fuel advantage over competitors. Every penny per gallon saved adds http://www.cheapjerseys11.com/ up with the airline consuming 1.1 billion gallons of fuel during the quarter. Delta warned in its earnings release that, for the first time in several years, year over year fuel prices will be higher in the next quarter. airlines are now struggling with too many seats in the sky, lower airfares and increased costs for most non fuel expenses including salaries and payments for new aircraft.
The amount of money Delta collected for each mile that each available seat flew plunged 6.8 percent during the three months that ended Sept. 30.
The average airfare for each 1,000 miles passengers flew during the summer was $153.80, down 5.3 percent from the $162.40 Delta collected during the same period last year.
The number of available seats and the miles they flew increased 1.5 percent while the actual flying by paying customers fell 0.2 percent. A year ago, 86.8 percent of Delta’s seats were filled with paying passengers during the peak July, August and September quarter. That fell this year to 85.4 percent.
Delta, the world’s second largest airline by passenger traffic, said it plans to slow its growth to 1 percent in the next quarter and into 2017 so it can try to raise airfares. It hopes that its industry leading on time performance will convince travelers especially higher paying business fliers to book with Delta and possibly pay more to do so.
Delta indicated on a call with investors that airfares may have hit their low point.
The airline’s president, Glen Hauenstein, said that within the next 90 days he expects more than half of Delta’s routes to see higher year over year revenue per available seat. In the past six to eight weeks, the airline has seen airfares climb on last minute bookings.
While Delta is taking in cheap jerseys less cash, it’s also paying out more.
The number of full time equivalent employees rose 1.3 percent to 84,084. Salaries and benefits jumped 8 percent to $2.5 billion. And that doesn’t factor in a proposed new pilot contract which would drive up Delta’s wage expenses more.
Delta also continued to replace its aging fleet of jets, leading to a 14 percent increase in its aircraft payments. Its fleet climbed from 925 jets to 960 in the past year. The new jets also have more seats than those they are replacing, making it even harder for Delta to easily pull down its capacity and increase airfares.
Overall, Delta’s revenue for the quarter declined 6 percent to $10.48 billion from $11.11 billion last year and fell short of Wall Street forecasts. Four analysts surveyed by Zacks Investment Research expected $10.59 billion. The airline said $100 million of that shortfall was a result of an August computer outage that grounded its planes around the globe and led to more than 2,300 flight cancelations.
On a per share basis, the Atlanta based company said it had profit of $1.69. Earnings, adjusted for non recurring costs, came to $1.70 per share. That profit surpassed Wall Street expectations.