The large US airline Delta has issued its latest figures today, which showed the airlines cost-cutting measures had helped offset rising fuel costs that have beset much of the aviation industry.
Delta's net income rose to $1.31 billion
The Trump supporting airline adjusted pre-tax income for the September quarter 2018 was $1.6 billion, and adjusted earnings per share were $1.80, at the high end of guidance. Adjusted earnings per share were up 16 percent compared to the prior year quarter, driven by revenue momentum, tax reform benefits and a four percent lower share count. Results reflect a $30 million negative impact from Hurricane Florence.
“Our solid 8% revenue growth, combined with flat non-fuel unit cost performance, helped offset 85% of the $655 million fuel cost increase in the quarter. These achievements are a testament to the strength of the Delta business model and the hard work of the Delta people, and I am pleased to recognise their performance with an additional $395 million toward 2018 profit sharing,” said Ed Bastian, Delta’s Chief Executive Officer. “Our commercial momentum and improved cost trajectory give us confidence that we are on a path to deliver continued top-line growth and expand margins as we move into 2019."
Revenue Environment
Delta’s adjusted operating revenue of $11.8 billion for the September quarter improved 8% or $912 million versus the prior year. This quarterly revenue result marks a record for the company, driven by improvements across Delta’s business, including a nearly 20% increase in premium product ticket revenues and double-digit percentage increases in cargo, loyalty and Maintenance, Repair and Overhaul revenue.
Total unit revenues excluding refinery sales (TRASM) increased 4.3% during the period driven by strong demand and improving yields. Foreign exchange benefit of approximately half a point was offset by the impact of Hurricane Florence.
“We generated record revenues in the September quarter on strong demand across the business and a favourable yield environment. In the December quarter we expect total unit revenue growth of three to 5%, driving full-year revenue growth to eight percent, the high end of our guidance,” said Glen Hauenstein, Delta’s President. “The benefits of our brand, industry-leading network, and relentless focus on the customer are driving revenue growth, improving margins and accelerating the pace of our recapture of higher fuel costs.”
Cost Performance
Total adjusted operating expenses for the September quarter increased $1.0 billion versus the prior year quarter, with more than half of the increase driven by higher fuel prices.
CASM-Ex was flat for the September quarter 2018 compared to the prior year period, a three-point improvement from the June quarter. Efficiency gains successfully offset cost pressures from higher revenue-related costs and product and employee investments.
“The September quarter marked an important inflection point in changing our non-fuel cost trajectory, and we expect to deliver on our full-year target of one to two percent non-fuel unit cost growth,” said Paul Jacobson, Delta’s Chief Financial Officer. “Continued focus on cost control, along with incremental efficiency gains from reflecting and One Delta, give us confidence in our ability to keep our non-fuel unit cost growth below 2% next year.”
Adjusted fuel expense increased $655 million, or 35 percent, relative to September quarter 2017. Delta’s adjusted fuel price per gallon for the September quarter was $2.22, which includes $12 million of benefit from the refinery.
Adjusted non-operating expense improved by $30 million versus the prior year, driven primarily by pension expense favorability. The company expects 2018 full-year adjusted non-operating expense to be approximately $300 million, representing a $160 million improvement over prior year due to favourable interest and pension expenses, offsetting reduced partner earnings due to higher fuel.
Adjusted tax expense declined $221 million for the September quarter primarily due to the reduction in Delta’s book tax rate from 34% to 23%.
(Photos Delta Air Lines)