Airline’s 2Q profit misses forecast
Delta’s net off 21% from ’16, but fares are trending higher
DALLAS — Shares of Delta Air Lines Inc. dipped Thursday after the company reported second-quarter profit and revenue below Wall Street expectations.
The results pointed to an increase in average fares, as a key revenue measure rose for the first time since 2014. The airline predicted that the trend toward higher prices would continue in the third quarter.
Delta had already signaled the increase in so-called unit revenue, the amount that passengers pay for every seat flown 1 mile. So investors appeared to focus Thursday on the below-expectations adjusted profit and revenue.
Atlanta-based Delta reported net income of $1.22 billion, down 21 percent from the same quarter last year.
The results were hurt by a stormy April day in Atlanta that turned into a five-day interruption in operations. The airline struggled to get planes and crews back into position and canceled about 4,000 flights. Delta said the incident cut profit by $125 million.
Chief Executive Officer Ed Bastian said on a call with analysts that Delta sped up technology investments and made other changes so it can recover more quickly from interruptions this summer.
Excluding what it termed nonrepeating costs, Delta said adjusted earnings were $1.64 per share. Nine analysts surveyed by Zacks Investment Research had predicted $1.66 per share on average.
Revenue rose 3 percent to $10.79 billion, below the analysts’ forecast of $10.83 billion.
Delta predicted that unit revenue, the closely watched per-mile figure, would rise between 2.5 percent and 4.5 percent in the third quarter after the 2.5 percent gain in the second quarter. The permile figure had declined throughout 2015 and 2016 as cheaper jet fuel led to a glut of flights, pushing average fares lower.
Investors are looking for airlines to limit their growth to push up fares. Delta said it would increase seats for sale by 1 percent in the third quarter compared with a
Analysts generally gave lukewarm responses to Delta’s results and third-quarter forecast.
J.P. Morgan analyst Jamie Morgan called the revenue prediction “good not great, and hopefully conservative.” Stifel analyst Joseph DeNardi said it was “good enough” as a sign that travel demand continues to improve, but he expressed concern that rising costs will limit profit margin in the rest of 2017.
Delta shares fell 98 cents, or 1.8 percent, to close Thursday at $54.50. They had climbed 13 percent this year before Thursday, beating the 9 percent gain in the Standard & Poor’s 500 index. The shares started the day up 38 percent in the last 12 months.
Also on Thursday, CEO
Bastian said he was “appalled” by insulting remarks about U.S. flight attendants made by his counterpart at Qatar Airways Ltd.
Qatar Airways CEO Akbar Al Baker at a Dublin event disparaged U.S. flight attendants as “grandmothers,” while boasting that his airline’s cabin crews had an average age of 26. He apologized on Wednesday after being criticized by labor unions and American Airlines Group Inc., in which Al Baker is interested in buying a major stake.
Delta, American and United Continental Holdings Inc. have pushed the U.S. for two years to open talks on whether Qatar Airways, Emirates and Etihad Airways PJSC use government subsidies to compete unfairly. The dispute has descended at times
into verbal disputes, with Al Baker being dismissive of the performance of the U.S. companies.
“I was appalled to hear Akbar’s comments about our people,” Bastian said on an earnings conference call Thursday.
“I’m told he has apologized, but I think that’s woefully inadequate. There’s a consistent theme there that he wants to skirt the rules and play by his own rules.”
Bastian said he was glad that Delta employees and those at other U.S. airlines “spoke with one large voice to say that it’s unacceptable, inappropriate.”
Information for this article was contributed by David Koenig of The Associated Press and Mary Schlangenstein of Bloomberg News.
A Delta Air Lines jet descends for a landing at LaGuardia Airport in New York. The airline’s quarterly results were hurt by a stormy day in April.