Delta’s Stock Muted After Lackluster October Traffic Results
Delta Air Lines’ (NYSE:DAL) October traffic results failed to please and weighed on the stock’s sentiment last week. Delta reported a 3.8% fall in system traffic for the month of October compared to the same period last year. System traffic, which is a function of system capacity and occupancy rates, suffered due to a cut down in domestic seat miles and lower Atlantic and Pacific capacity. The capacity cuts implemented during October, resulted in fuller planes on the domestic routes with 1.3% higher occupancy, y-o-y. However, lower occupancy rates for international flights dragged system loads down by 0.6%. (See Delta Air Lines Reports October Traffic, Press Release, November 3). Peers United Continental (NYSE:UAL) and American Airlines (NYSE:AMR) also ended the week in red, while the broader market was largely flat.
See our complete analysis for Delta Air Lines’s stock
While the airline is losing on passenger volumes following lower total flights, it intends to benefit from the associated fuel cost savings as well as increased leverage to hike fares. The trade-off is favorable for Delta as steeply rising fuel prices are a major headwind for the industry today and cost the airline a billion more in fuel expenses in the September quarter. While the removal of old, less efficient fleet is expected to bring domestic capacity down in the fourth quarter, Delta plans to grow international capacity in response to any favorable market opportunities. The only area of growth for December quarter will be in Latin America, where capacity will be rise to cater to the growing market demand in Central and South America. We recently talked about Delta’s expansion strategy while discussing its third quarter earnings in our article Latin America Growth, Partnerships Boost Delta’s Outlook.
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We currently have a Trefis price estimate of $9 for Delta Air Lines’s stock, just ahead of the current market price.
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