Abu Dhabi, UAEFriday 17 January 2020

Delta reports higher profit as airline picks up customers from rivals impacted by 737 Max

Airlines that own Boeing's grounded aircraft are cancelling more than 10,000 flights per month

A Delta Air Lines ticket agent assists a passenger at Hartsfield Jackson Atlanta International Airport in the US. The company reported an 8 per cent year-on-year rise in net income to $1.1bn in the final three months of 2019. EPA
A Delta Air Lines ticket agent assists a passenger at Hartsfield Jackson Atlanta International Airport in the US. The company reported an 8 per cent year-on-year rise in net income to $1.1bn in the final three months of 2019. EPA

Delta Air Lines reported a fourth-quarter profit that beat analysts' estimates, boosted in part by customers it gained from rival airlines' 737 Max cancellations and growing air travel demand.

Airlines that own Boeing Co's 737 Max are cancelling more than 10,000 monthly flights in total as the aircraft remains grounded following two deadly crashes.

Delta does not operate the Max, enabling it to expand its flight capacity and capture new customers, even as peers like Southwest Airlines Co have had to scale back.

Atlanta-based Delta's net income rose 8 year-on-year to $1.1 billion (Dh4bn) in the quarter to December 31. Adjusted earnings per share hit $1.70, beating analysts' expectations for $1.40 per share, according to data from Refinitiv.

Total operating revenue rose 7 per cent to $11.4 billion.

Shares were up about 4 per cent in early trading.

"There's no question that we're picking up new customers, but that's not the main driver of our performance," Delta Air Lines chief executive Ed Bastian said, citing strong customer loyalty at a time when air travel demand continues to rise.

Lower fuel costs and a 9-cent-per-share gain from the sale of its stake in Brazil's Gol also propped up profit.

In the first quarter, Delta expects revenue growth of 5 to 7 per cent year-on-year as US demand rises in spite of heightened geopolitical tensions. Revenue per available seat mile are forecast as being flat-to-2 per cent higher and non-fuel unit costs up 2 to 3 per cent.

Delta, the first of its peers to report quarterly results, generated $4.2bn of free cash flow for the year, and expects to repeat that this year, enabling new investments in technology to improve passenger experience.

JP Morgan analyst Jamie Baker called the cash flow "unchartered territory for any airline".

As for new aircraft, Delta is still interested in Boeing's proposed new midsized aircraft, known as the NMA, despite the planemaker's delayed decision on whether to launch the new aircraft as it continues to deal with the 737 Max fallout.

Delta wants to remain a customer of both Boeing and Airbus but the longer Boeing takes to decide on the NMA's launch, the fewer options the carrier has, Bastian said, noting Airbus' A321XLR and A330 could be alternatives.

The airline is also still interested in investing around €100 million (Dh408.4m) in the rescue of Italian flagship carrier Alitalia, Bastian said, and is working on antitrust immunity in South America after closing the acquisition of a 20 per cent stake in LATAM Airlines Group this month .

Updated: January 14, 2020 08:53 PM

SHARE

SHARE