Delta Tops Estimates and Projects Strong Growth

ATLANTA ( TheStreet) -- Delta  ( DAL)  beat fourth-quarter analysts' estimates and projected strong growth for the current quarter and year, accompanied by effective cost controls.

The carrier said net income excluding items was $558 million, or 65 cents a share. Analysts surveyed by Thomson Reuters had estimated 63 cents. Revenue rose 6% to $9.1 billion. Analysts had estimated $9 billion.

Including an $8 billion non-cash gain associated with the reversal of the company's tax valuation allowance, net income was $8.5 billion.

In premarket trading Tuesday, Delta shares were up $1.08 to $32.15.

"Our December quarter profit caps off a successful year for Delta with strong profitability and margin expansion, industry-leading operations and significant improvements in customer satisfaction," said CEO Richard Anderson, in a prepared statement. "We have a solid set of initiatives in place to improve our financial results, operational performance and customer satisfaction levels beyond 2013's record levels."

Looking ahead, Delta said it expects further revenue and margin improvement. For the current quarter, Delta expects an operating margin between 6% and 8%, capacity expansion of 2% to 3% and a gain in cost per available seat mile of 0.5% to 1.5%.

"With a solid demand environment, industry-wide capacity discipline and a number of Delta's revenue initiatives already delivering benefits, we expect to produce significant margin expansion in the March quarter," said President Ed Bastian. "As we move through the year, we expect to generate top-line revenue growth as we implement our Virgin Atlantic joint venture, continue to restructure and diversify our Pacific network, gain additional corporate share, and ramp up our merchandising efforts."

During the quarter, passenger revenue per available seat mile rose 3%, led by a 6.6% domestic gain. Latin America PRASM gained 1.9%, Atlantic PRASM gained 0.1% and Pacific PRASM lost 2.2%. Capacity gained 2.9% including a 2.6 domestic gain and a 16.3% gain in Latin America.

On the cost side, consolidated cost per available seat mile excluding fuel, profit sharing and special items gained 1.4%, driven by the impact of wage increases and operation and service investments. Cost increases were partially offset by lower fuel expenses and the savings from Delta's structural cost initiatives. Fuel expense excluding mark-to-market adjustments declined by $91 million due to lower prices and better settled hedge performance.

Operations at the Trainer refinery produced a $46 million loss for the December quarter and a $116 million loss for the full year. Lower crack spreads pressured results at the refinery, but also reduced market jet fuel prices and helped lower Delta's overall fuel expense.

"Delta's non-fuel unit cost growth of just over 2% for all of 2013 was three points better than our projections at the start of the year due to the success of our cost initiatives," said Chief Financial Officer Paul Jacobson. He said cost initiatives would keep future annual unit cost growth below 2%.

For the full year, Delta reported net income excluding items of $2.7 billion, compared with $1.6 billion in 2012. Year-end net debt was $9.4 billion, reflecting $7.5 billion in net debt reduction since 2009. Interest expenses fell by $153 million in 2013. In the current year, the carrier expects to reduce debt by $1 billion and reinvest $5 billion in its business.

W ritten by Ted Reed in Charlotte, N.C.

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