Delta Q2’16 Earnings Preview: Rising Oil Prices, Lower Unit Revenues May Drag Down Revenues
Key Trends:
- Delta’s passenger revenue per available seat mile (PRASM) has declined by 4% – 5% in each of the last three months due to continued foreign exchange headwinds and domestic competition. This will likely cause its PRASM to be on the higher side of the guidance range provided for Q2’16.
- The company recently downward revised its guidance on system capacity, to less than 2% for the second half of 2016, in order to improve its unit revenue and manage the rising fuel costs.
- The crude oil prices increased almost 37% since Q1’16 due to a range of factors, such as production cuts in the U.S., geopolitical disturbances in Venezuala and Nigeria, and a wild-fire in Alberta, Canada. As a result, Delta may exceed its fuel price guidance in Q2’16, which is likely to negatively impact its operating margins.
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- Delta’s aggressive share buyback program is likely to improve its earnings growth, even as the fuel expenses increase.
Have more questions about Delta Air Lines (NYSE:DAL)? See the links below:
- How Did The Legacy Carriers Perform Operationally In January?
- Why Did Delta’s Operating Margin Soar In 2015?
- Delta Air Lines: The Year 2015 In Review
- How Will Delta’s Revenue And EBITDA Grow Between 2015 and 2018?
- How Has Delta’s Revenue And EBITDA Changed Over The Last Five Years?
- What Is Delta’s Revenue And EBITDA Brekdown?
- What Is Delta’s Fundamental Value Based On Estimated 2016 Numbers?
- How Has Delta’s Revenue And EBITDA Composition Changed Over The Last Five Years?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Delta Air Lines Limited
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