Delta Posts Q4 Profit On Lower Fuel Costs

Delta Air Lines swung to a USD$980 million profit in the fourth quarter, from a USD$712 million loss for the same period a year ago.

Revenue for the quarter was USD$9.5 billion, down from the USD$9.647 billion reported for the same period last year.

Delta said a billion dollar windfall from low fuel prices will far offset slumping sales to Europe after the November Paris attacks, forecasting its profit margin will more than double in the first quarter.

With fuel prices down by nearly half from a year earlier, Delta said it expects an operating margin between 18 and 20 percent in the first quarter, up from 8.8 percent in the same period in 2015.

Delta has also bet that fuel will stay lower for longer.

Delta has closed its fuel hedges for 2016, exiting contracts at a cost of USD$100 million to USD$200 million per quarter, chief financial officer Paul Jacobson said.

Delta expects USD$3 billion in fuel savings this year, Jacobson said. A spokesman confirmed that staff costs are now Delta's largest cost.

The guidance appeared to outweigh investor concerns about lower unit revenue in 2016.

For the first time, Delta provided details on the longer-term impact of the November 13 Paris attacks in which 130 people died.

Delta, the US partner of Air France-KLM, expects the Paris attacks to hurt unit revenue in the first quarter by 0.5 percentage points, its President Ed Bastian said. He added that Delta has had lower demand from corporate clients for international travel since the attacks.

Delta now expects passenger unit revenue to drop between 2.5 and 4.5 percent in the first quarter. That includes a headwind from the strong US dollar, which has lowered the value of foreign sales in dollar terms for months.

Delta has slowed capacity growth to Europe since the attacks and expects to reduce seats abroad by 2 percentage points in 2016 to counteract weak demand, Bastian said.