Delta (NYSE:DAL) reported good operational performance and passenger growth for June.  The improved numbers provide relief in the current uncertain economic environment where a revival of the airline industry is threatened by fluctuating fuel prices and the euro crisis. The airline reported 8% year-over-year increase in passenger revenue on growth in domestic passenger traffic and business travel, with strong performance at LaGuardia Airport. Cargo ton miles also increased 4.8% for the same period.
We have a Trefis price estimate of $11 for Delta Airlines, in line with its current market price.
Revenue passenger mile (RPM), an indicator of passenger traffic, grew 0.9% for domestic routes from a year ago, but declined 0.3% for international routes. Further, for international routes, passenger traffic grew approximately 6% and 7% for Latin America and Pacific routes, respectively, but declined by nearly 6% for the Atlantic route due to the impact of euro-crisis.
Good operational management
The load factor, which indicates the percentage of seats occupied on a flight, also increased 1.8% year-over-year to reach 88.1%, aided by a 1.7% capacity cut during the same period.
Airlines need to manage their capacity to ensure fewer vacant seats on flights. During June, Delta managed to reduce capacity in a way where it was able to increase the load factor without impacting its business through capacity constraint.
The completion factor, which indicates the percentage of flights completed without cancellations, also increased 0.6% to reach 99.6% for Delta mainline.
Additionally, given that the airline incurred a high average fuel price of $3.29 per gallon during June, the numbers indicate good operational management, which is important in the current environment where the margins are under pressure.Notes:
- Delta Reports Solid Revenue and Operating Performance for June, July 3rd 2012, www.delta.com [↩]