Delta net income grows but further revenue fall flagged amid US government shutdown
Delta Air Lines yesterday forecast a further fall in unit revenue growth in the first quarter of 2019, adding to growing concerns about airlines’ ability to raise fares in an uncertain global economy.
The United States’s second-largest airline reported quarterly revenue in line with analysts’ estimates and profit that topped consensus by 3 cents per share.
Net income surged to $1.02 billion, or $1.49 per share, in the quarter ended December 31, from $299 million, or 42 cents per share, a year earlier. The year earlier quarter included a charge of $394m related to the tax reform.
But it forecast year-on-year unit revenue growth would be hurt in the current quarter by the timing of Easter, increasing foreign exchange headwinds, and the ongoing government shutdown.
It also said first-quarter earnings per share should be between 70 cents and 90 cents, below analysts’ estimate of 94 cents, according to IBES data from Refinitiv.
Shares fell 1.5 per cent to $46.99 in trading before the bell. Both Delta and larger rival American Airlines lowered estimates earlier this month for fourth-quarter unit revenue, raising concerns that an economic deceleration was hurting business travel and sending their shares sharply lower.
Delta said yesterday its unit revenue, which compares sales to flight capacity, will be in a range between flat to up 2 per cent in the first quarter, compared with 3.2 per cent growth in the fourth quarter ended December 31.
On an adjusted basis, the airline earned $1.30 per share for the fourth quarter, above the $1.27 per share expected by analysts.
Total operating revenue rose 5 percent to $10.74bn, in line with the Wall Street estimate of $10.74bn.
Yesterday, US bank JP Morgan reported a lower than expected quarterly profit as a slump in bond trading outweighed gains from higher interest rates and loan growth.
Shares of the largest US bank by assets fell 3 per cent in early trading as the lender posted declines in revenue in three of its four main businesses in the fourth quarter.
Overall adjusted fixed income trading revenue fell 18 per cent as investors fled commodities and credit trading markets due to spikes in volatility toward the end of 2018.
Citigroup also cited the same reason for its sharp drop in fixed income revenue on Monday. Trading desks at banks have been shaken by global growth concerns and the ongoing trade war between the United States and China, with bank stocks underperforming the S&P 500 index in 2018 by 13 per cent.
“As we head into 2019, we urge our country’s leaders to strike a collaborative, constructive tone, which would reinforce already-strong consumer and business sentiment,” chief executive Jamie Dimon said.
JP Morgan’s profit also took a hit from a 6 per cent rise in expenses as it invested in technology, marketing and real estate.
The bank’s net income rose 67 per cent to $7.07 billion, or $1.98 per share, from a year ago when it took a one-time charge due to the US tax reform. It, however, missed analysts’ average estimate of $2.20 per share, according to IBES data from Refinitiv.