Delta Air Lines last week reported financial results for the March quarter 2017, indicating that adjusted pre-tax income for the quarter was $847 million.
However, this was a $713 million decrease from the March 2016 quarter, primarily driven by higher fuel prices.
“Despite fuel price pressures, the Delta people once again delivered solid results across the board, with double digit operating margins, strong improvements in customer satisfaction, and progress on our international expansion with the closing of our Aeroméxico transaction,” said Ed Bastian, Delta’s chief executive officer.
“Producing these results in our toughest quarter of the year shows not only how far we’ve come, but also that we have more opportunity in front of us to continue building a better airline for our employees, customers, and owners.”
Revenue Environment
Delta’s operating revenue for the March quarter was down $103 million versus prior year, including $20 million of lower year over year currency hedge gains. Passenger unit revenues declined 0.5 percent on 0.5 percent lower capacity.
“March marked the first month of positive passenger unit revenues since November 2015 and we are encouraged by the current fare and demand trends across the network. We expect June quarter passenger unit revenues to increase one to three percent and remain positive throughout the year,” said Glen Hauenstein, Delta’s president. “However, we will keep our full year capacity growth capped at one percent to support this unit revenue momentum and the company’s return to margin expansion.”
Cost Performance
Adjusted fuel expense increased $327 million compared to the same period in 2016 due to 52 percent higher market prices. Delta’s adjusted fuel price per gallon for the March quarter was $1.71, which includes $0.05 cents of benefit from the refinery and $0.09 cents of losses from legacy hedges.
Adjusted non-operating expense declined $13 million year over year, primarily driven by lower interest expense.
“We expect the entirety of our 2017 margin pressure to have occurred in the March quarter from higher fuel prices. With an improving revenue profile and further improvement as our cost growth moderates in the second half, we are on track to expand margins for the balance of the year,” said Paul Jacobson, Delta’s chief financial officer.
“Going forward, by remaining disciplined with our costs and capital, we’ll be well positioned to achieve our long-term financial targets,” he added.
