Delta Q3 Unit Revenue Down 4.5-5.5 Percent

October 2, 2015

Delta Air Lines' third-quarter unit revenue continued to fall during the year's busiest travel season but the airline hinted that financial metrics were already improving.

Delta said passenger unit revenue declined between 4.5 and 5.5 percent, compared with earlier guidance of a 4.5 to 6.5-percent drop.

For months, Delta and rivals American and United have seen steep declines in unit revenue as a strong US dollar hurt travel demand abroad and smaller surcharges in international markets decreased the value of sales.

The industry has taken steps to reduce autumn and winter capacity to match lower demand, which analysts say should help unit revenue. According to Sterne Agee CRT analyst Adam Hackel, the unit revenue decline likely reached its bottom in the third quarter.

Delta said it expects third-quarter operating profit margin, adjusted for the changing market value of its fuel hedges, to be between 20 and 21 percent, compared with 15.8 percent a year earlier.

Margins have benefited because the cost of fuel - typically a third of airlines' operating expenses - has fallen dramatically from a year ago. Delta said it paid between USD$1.80 and USD$1.85 per gallon on average in the third quarter.

However, the airline said unit costs excluding fuel, profit-sharing and other expenses grew about 1 percent in the quarter. JPMorgan analyst Jamie Baker said in a research note that unit costs will likely rise about 2 percent in the fourth quarter because Delta has increased non-pilot salaries.

(Reuters)