Elvis90

Delta reports $586 million net income for second quarter

July 25, 2012


Helped by strong revenue growth, Delta reported a $586 million profit for the second quarter.

“Delta’s solid profit this quarter (excluding special items) is evidence that our business and industry are evolving and delivering meaningful improvements,” Richard said in a release Wednesday. “I am grateful for the hard work of the entire Delta team that produced these results and I congratulate them on earning $135 million in profit sharing so far this year.”

The net income of 69 cents a share before one-time items beat Wall Street estimates. Under U.S. accounting rules, Delta formally reported a $168 million loss after subtracting costs for employee buyouts, paper losses on its fuel hedge portfolio and other one-time expenses in the quarter that ended June 30. Last year Delta earned $198 million including one-time charges in the same three months.

Total revenue increased 6 percent despite Delta flying 1.3% less capacity than last year’s second quarter. Strong demand –especially from corporate travelers*– increased total traffic by 0.3% despite the airline flying less. Delta has outperformed the industry on unit revenue for 15 consecutive months.

“By actively managing the business through capacity adjustments and pricing actions, we expect to maintain our solid revenue performance despite the continuing weak economic backdrop,” Ed said in the release. The Pacific region saw revenue increase 20% over last year as demand and pricing recovered strongly from last year’s tragic earthquake and tsunami in Japan.

Delta’s improved earnings were aided by exceptional operational performance, Paul said in a memo to employees Wednesday. “By all measures, these are some of the best financial and operational results in Delta’s history and I appreciate all of your hard work that went into producing them,” he said in the memo.

Fuel costs remain historically high even as crude oil prices moderated in the last half of the quarter. Delta paid $3.37 a gallon in the quarter including losses on its fuel hedges settled and took a $561 million charge to “mark to market” the value of its future fuel hedges based on the quarter-end fuel prices. That one-time charge was significantly smaller than earlier forecast because fuel prices rose in the quarter’s final week.

Delta expects to benefit from lower fuel prices for the second half of the year, estimating that it will pay $3.09 a gallon for the third quarter and $3.05 a gallon for the fourth quarter.

Delta remains on track to lower net debt to $10 billion by next year as it has cut $5 billion of the $7 billion targeted. Less debt lowered interest payments and improves results, which translates into better profit sharing for employees.

Richard said the outlook is encouraging for the summer quarter, traditionally Delta’s strongest.

“Moving forward, we expect to have strong profitability in the September quarter with a 10 – 12% operating margin as we continue to look for innovative ways – such as the Trainer refinery acquisition and the LaGuardia expansion – to build a stronger Delta for our shareholders, employees and customers,” Richard said.

Bucking Bar

Aside from one cubicle; Delta is turning in 10 to 12% margins, yet we continue to shrink.

forgot to bid

I know, -1.3% capacity = + 6% revenue increase.

If a +1.3% capacity = < 6% revenue increase, we'll never grow.

Which is why I'd love to see Delta's numbers of what DCI 450 + DAL 800-805 equals in terms of capacity from where we are today.

nyc7erb

That is incorrect information. What they cannot do is assign (ie: schedule) in advance (like b4 you sign in for a trip) anything that violates a golden day. However, once you are out on the trip, they can reroute you into a golden day. The only compensation is 9 hours free of duty and then a payback day. There is no financial duty on the company.

I will tell you that in my many years on reserve, I was never scheduled into an X or Golden day. I know it is very rare and I think the company does all it can to protect you on those days. However, this is the airline biz and they have to 'keep that jet movin!'. Sorry that it happened to you, however I think people in any business are tasked sometimes with working on a day off. At least you get a comp day out of. Most companies say 'too bad'.

cni187

Doesn't look like we'll hit that $2.5 billion profit. Did someone get fired over the fuel hedge?

Bucking Bar

Q2 Earnings Conference call webcast at:

Webcasts

FTB, I just wonder at what point we have to start dismantling hubs. Without a "critical mass" of connecting flight the O&D markets of any of our hubs, except New York, are unsustainable. An announcement on MEM or CVG would not surprise me. ACL talks about a "backside of the power curve" when really what he correctly means a "back side to the demand curve."

Europe keeps surprising Delta management with better than anticipated bookings. One man's "financial collapse" is another man's "cheap European vacation" not to mention all the government officials, bankers and politicians who can't turn a conference call into a photo op and who take their entire extended family with them, plus servants, when they travel (I'm not kidding, a friend of my wife works for one of them).

Bucking Bar

We need a simple rule. Bidders on contracts must be in a good faith position to take delivery and be actual consumers. (and yes, that would remove Delta from buying heating oil contracts)

The problem with sovereign wealth funds and Goldman entering the market in an overwhelming way is these non consumers "create the market." They profit from simple volatility. The actual price to them is meaningless (since they do not consume). All they care about is the direction of the price.

This unregulated and unfair market manipulation has a deeply harmful effect on businesses like ours ... and that trickles down to to the consumers who pay more due to the increase in costs as well as the cost of uncertainty.

Capitalism requires fair markets to function efficiently.

Columbia

Southwest would disagree. These market makers provide liquidity to allow companies to hedge. I doubt that if delta made $1 billion in profit from the hedges, that they would pass through the savings to the consumer.

cni187

Well stated. I was unfairly throwing sarcasm out there.

forgot to bid

best operational performance in Delta's history.
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further reduce capacity? Did I hear that? 5% for international this fall? Is that new or previously announced?

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500 50-seaters in 2008. So we dropped 150-200 since then?

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