Delta 2Q profit falls, misses Wall Street predictions
Posted July 13
DALLAS — Shares of Delta Air Lines Inc. dipped Thursday after the company reported second-quarter profit and revenue below Wall Street expectations on higher costs for fuel and labor.
But the results pointed to an increase in average fares, as a key revenue measure rose for the first time since 2014. The airline predicted that the trend toward higher prices would continue in the third quarter. Delta had already signaled the increase in so-called unit revenue, the amount that passengers pay for every seat flown one mile.
Atlanta-based Delta reported net income of $1.22 billion, down 21 percent from the same quarter last year.
The results were hurt by a stormy April day in Atlanta that turned into a five-day interruption in operations. The airline struggled to get planes and crews back into position, and canceled about 4,000 flights. Delta said the incident cut profit by $125 million.
CEO Ed Bastian said on a call with analysts that Delta sped up technology investments and made other changes so it can recover more quickly from interruptions this summer.
Also, Delta's fuel and labor costs grew by $445 million from a year earlier, or an 18 percent bump for fuel and 9 percent for labor.
Excluding what it termed non-repeating costs, Delta said adjusted earnings were $1.64 per share. Nine analysts surveyed by Zacks Investment Research had predicted $1.66 per share on average.
Revenue rose 3 percent to $10.79 billion, below the analysts' forecast of $10.83 billion.
Delta predicted that unit revenue, the closely watched per-mile figure, would rise between 2.5 percent and 4.5 percent in the third quarter after the 2.5 percent gain in the second quarter. The per-mile figure had declined throughout 2015 and 2016 as cheaper jet fuel led to a glut of flights, pushing average fares lower.
Investors are looking for airlines to limit their growth to push up fares. Delta said it would increase seats for sale by 1 percent in the third quarter compared with a year earlier.
Analysts generally gave lukewarm responses to Delta's results and third-quarter forecast.
J.P. Morgan analyst Jamie Morgan called the revenue prediction "good not great, and hopefully conservative." Stifel analyst Joseph DeNardi said it was "good enough" as a sign that travel demand continues to improve, but he expressed concern that rising costs will limit profit margin in the rest of 2017.
Delta shares fell 98 cents, or 1.8 percent, to close at $54.50.