Delta’s January 2017 Metrics Fail To Make A Mark On The Market

by Trefis Team
Delta Air Lines
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After a challenging 2016 and a tumultuous start to 2017, Delta Air Lines (NYSE:DAL) was seen trading roughly in line after it released its January traffic report.


The traffic report, although in line with company’s capacity guidance, showed a decline in unit revenues in the month comparable to that seen in the previous quarter. This leads to doubts on the company’s ability to be able to turn around its unit revenues to positive in the first quarter. Although the unit revenues, or passenger revenue per average seat mile (PRASM), have been under pressure throughout 2016 due to the strong dollar, geopolitical turmoil, and increasing competition from low cost carriers, the headwinds were seen dissipating through Q4’16. The decline of -2.5% y-o-y in January is attributable to the winter storm, Helena, which caused havoc at Delta Air Lines. The company may continue to face pressure on its trans-atlantic routes, as Norwegian Airlines expands its presence in the U.S., resulting in increased competition on an already busy route, causing Delta to reduce its fares in order to attract customers.

Talking about capacity management, in line with the company guidance of flat capacity growth, Delta’s available seat miles decreased by -3.7% internationally, and rose 3.4% domestically, bringing the consolidated capacity up 0.6% y-o-y. Most of the cuts on the international routes continued to be in the Atlantic and Pacific regions. Further, growth in passenger traffic was disappointing at 0.4% y-o-y, owing to a 3.6% decline on its international routes. The situation was further worsened by a 10 bps fall in the January load factor, and only a modest rise the number of passengers boarded (+1.0%). The company underwent another technology glitch in the last days of January, resulting in the cancellation of 80 flights. This, in addition to Pres. Trump’s immigration policy are likely to have resulted in a decline in traffic.

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