Delta Expects a Profitable Fourth Quarter

Delta, the world's largest airline, beat earnings estimates and said continued strong demand will lead to a profitable fourth quarter.
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beat earnings estimates and said continued strong demand will lead to a profitable fourth quarter.

The first major carrier to report third-quarter results said it earned $929 million or $1.10 a share, excluding special items. Analysts had been estimating 94 cents. Revenue rose 18% to $9 billion; analysts had estimated $8.8 billion.

Including special items, Delta earned $323 million, or 43 cents a share. Special items were a $360 million noncash loss on extinguishment of debt, $153 million related to Comair's fleet reduction and $53 million in merger-related expenses. In the same quarter a year earlier, including special items, Delta lost $161 million, equivalent to a loss of 19 cents a share.

"We are making progress toward our goal of consistent profitability with 10-12% annual operating margins and we expect to be profitable for the December quarter," said CEO Richard Anderson, in a prepared statement.

During the quarter, consolidated passenger revenue per available seat mile rose 16%, driven by a 16% yield improvement. Pacific PRASM rose 45%, Atlantic PRASM rose 25% and domestic PRASM rose 9%.

"Delta's revenue performance exceeded our expectations for the quarter, with especially strong performance from our international markets," said President Ed Bastian, in a prepared statement. "We see demand strength through the holiday period and expect solid year over year unit revenue growth for the December quarter."

On the cost side, consolidated unit revenue excluding fuel and other items, was flat for the quarter, as capacity rose by 2%. Costs increased by $577 million, primarily due to higher fuel prices, profit sharing expenses and maintenance expense, partially offset by incremental merger cost synergies.

Looking ahead, the carrier forecast an operating margin of 6% to 8% in the fourth quarter, with system capacity up 5% to 7%. Domestic capacity would rise by 3% to 5% while international capacity boosts would total 10% to 12%.

-- Written by Ted Reed in Charlotte, N.C.

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Ted Reed