Delta Air Lines Inc on Tuesday reported fourth-quarter profit slightly below analysts’ expectations and forecast that passenger unit revenue will continue to decline in early 2016 amid “international volatility” and currency pressures.
Delta, the third-largest U.S. airline by capacity, said its adjusted profit in the fourth quarter grew 43 percent to $926 million, or $1.18 per diluted share. Analysts on average estimated Delta would earn about $928 million, or $1.19 per diluted share, according to Thomson Reuters I/B/E/S.
A precipitous decline in fuel prices has helped Delta’s bottom line, but the November attacks in Paris have shaken traveler demand and a strong U.S. dollar has lowered the value of foreign sales in dollar terms.
Facing these headwinds, Atlanta-based Delta expects passenger unit revenue, which compares ticket sales to flight capacity, to drop between 2.5 percent and 4.5 percent in the first quarter.
The decline is in line with analysts’ expectations, Sterne Agee CRT analyst Adam Hackel said.
Delta is poised to benefit from strong demand for U.S. domestic travel, he added. It has a limited number of flights to Dallas and Chicago, where competition between other top airlines and smaller, low-cost carriers has pushed down prices.
Shares inched up more than 1 percent in pre-market trading.
Delta is focusing “our commercial efforts on those areas of the business with the best opportunity such as the domestic marketplace, while reducing our exposure in some weaker international regions,” its President Ed Bastian said in a news release.
The carrier said it expects an operating profit margin between 18 percent and 20 percent in the first quarter, some 10 points better than a year ago.
Delta’s net income of $980 million in the fourth quarter of 2015 compared to a paper loss of $712 million a year earlier, which accounted for the value of its unsettled fuel hedge contracts dropping by $1.2 billion.
The airline said that in the quarter just ended, it lost $336 million from settled hedges, financial instruments that protected against rising oil prices but required a payout when prices fell.
The price of benchmark U.S. crude declined nearly 20 percent during the fourth quarter.
REUTERS
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