Delta‘s (NYSE:DAL) third quarter profits jumped 31% annually to $1.4 billion on higher passenger traffic that was driven by capacity expansion and supported by a stable demand environment for flights.  The carrier’s profit growth was also helped by gains from its structural cost-controlling measures which tempered growth in its non-fuel operating costs.
Looking ahead, Delta expressed confidence in the demand environment remaining stable through the fourth quarter with strong bookings for the coming holiday season. The carrier has accordingly forecast to raise its flying capacity by 1-3% annually in the fourth quarter in a bid to drive up top line and profits. 
See our complete analysis of Delta here. We are in the process of incorporating the carrier’s third quarter earnings and shall update our analysis shortly.
Capacity Expansion Drives Top Line Growth
Delta returned to a growth-oriented capacity stance in the third quarter after steadily lowering its flying capacity for the past several quarters. This reflects the possibility that the carrier is through with its capacity rationalization initiative that followed the acquisition of Northwest in 2008. Overall, in the third quarter, Delta raised its flying capacity by 3% annually with maximum expansion on international routes to Latin America followed by domestic routes and trans-Atlantic routes to Europe. The carrier’s higher flying capacity drove up its passenger traffic by 2% annually.  Passenger yields which provide a measure of fares also rose during the quarter. In all, higher passenger traffic and fares pushed up the carrier’s top line by 6% annually to $10.5 billion in the third quarter. 
Structural Cost-Controlling Steps Boost Profits
Top line gains were supported by structural cost-controlling measures that Delta launched last year. These measures, which include fleet restructuring, maintenance redesign, staffing efficiency and distribution channel changes, tempered the growth in the carrier’s non-fuel unit operating costs to 1% annually in the third quarter. We anticipate these measures to continue to moderate the growth in Delta’s non-fuel operating costs for the foreseeable future and thereby support its profit growth.
The carrier also realized significant gains from lower interest payments resulting from a lower debt load. As a result, its profits jumped 31% annually in the third quarter.
Initiation Of Capital Return To Shareholders Reflects Business Stability
Delta also started returning capital to shareholders during the quarter with $100 million in share buybacks and $51 million in dividend payments.  It is one of the few U.S. airlines including Southwest (NYSE:LUV) and Alaska Air Group (NYSE:ALK) that are returning capital to shareholders. This indicates that Delta has allocated sufficient capital to meet its growth needs such as purchasing new aircraft’s’, bringing down its debt to sustainable levels and fulfilling its pension liabilities. This shows that Delta has stabilized its business and has come a long way from its 2005-07 bankruptcy.Notes: