Delta Continues To Face Headwinds In Revenues, But Delivers On Earnings Growth in Q2’16
Delta Air Lines (NYSE:DAL) released its June 2016 financial results on 14th July 2016 [1], missing the consensus estimate for revenue slightly. This decline in revenue is attributable to the continued foreign currency headwinds from a strong dollar and yield pressures in the North Atlantic. In terms of bottom line, profits soared, growing 11% year on year (y-o-y) owing to lower fuel expense (-17% y-o-y) and the airline’s share buyback program.
Despite the decline in revenue, Delta’s share price saw an upward trajectory, likely due to the company’s target to achieve positive unit revenue by the end of the year. To this end, the airline cut its Q4 capacity growth guidance by 1 percentage point, primarily in its international markets.
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Overall, the system capacity growth guidance for the second half of the year was less than 2%, mainly due to cut backs in the UK capacity (-6%).
Moreover, Delta said that it expects unit revenue (PRASM) to be weak in July and August, steadily improving in September, the company’s best month traditionally.
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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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Notes:- Delta announces June quarter profit, delta.com, July 2016 [↩]