Delta Airline posts 70% profit in Q4 2014

Delta Airline has reported a 70 percent profit increase in its financial results for the December 2014 quarter.

Also, the airline in its financial reports said it may, in the new year,  save up to $2 bn as a result of lowered oil prices.

“Our 2014 performance – an industry-leading operation, superior customer service, and a 70 percent increase in profits – shows that Delta is focused on delivering growing value for its employees, customers and investors.

“As we begin 2015, we have a significant opportunity from lower fuel prices, which will drive more than $2bn in fuel savings over 2014.  Through our capacity discipline, pricing our product to demand, and the fuel savings, we expect to drive double-digit earnings growth, along with increased free cash flow and a higher return on invested capital in the upcoming year,” Richard Anderson, Delta’s chief executive officer, said.

Delta’s operating revenue improved 6 percent, or $571m, in the December 2014 quarter compared to the December 2013 quarter while traffic increased 4.0 percent on a 3.7 percent increase in capacity.

Also, passenger revenue increased 4.6 percent, or $361m, compared to the prior year period. Passenger unit revenue (PRASM) increased 0.8 percent year over year with a 0.6 percent improvement in yield.

According to the data, cargo revenue increased 2.1 percent, or $5m, driven by increases in both freight volumes and yields.

Other revenue however increased 21.3 percent, or $205m, driven by SkyMiles revenues, third-party refinery sales, and joint venture settlements.

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“Delta delivered solid revenue performance in the December quarter, growing our top line by 6 percent against a backdrop of nearly 15 percent lower fuel prices.

“While we face headwinds from the stronger dollar and lower fuel prices going forward, we have confidence we can continue to generate top-line growth as we realise additional benefits from our Virgin Atlantic joint venture, restructure our Pacific network, gain additional corporate share, and ramp up our merchandising efforts with branded fares and enhanced customer segmentation,” Ed Bastian, Delta’s president, said.

He explained that fuel expense declined $342m driven by lower market prices and higher refinery profits.

Delta’s average fuel price was $2.62 per gallon for the December quarter, which includes $180m in settled hedge losses.

At December 31, Delta had $925m in hedge margin posted with counterparties while operations at the refinery produced a $105m profit for the December quarter, a $151m improvement year-over-year.

“We expect a net year-over-year fuel price benefit of $500m in the March quarter and will work throughout 2015 to maximise the benefit of fuel savings to our bottom line,” Paul Jacobson, Delta’s chief financial officer, said.

With its strong cash generation in the December 2014 quarter, the company returned $575m to shareholders. The company paid $75m in cash dividends and repurchased 12.2m shares at an average price of $40.96 for $500m.  In 2014, the company returned a total of $1.35bn to shareholders by paying $251m in quarterly dividends and spending $1.1bn to repurchase 28.6m shares.

Delta ended the quarter with adjusted net debt of $7.3bn, including cash that is being held by counterparties as hedge margin.  The company has achieved nearly $10bn in net debt reduction since 2009, resulting in a roughly 50 percent reduction in annual interest expense.

Sade Williams