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Delta announces $1 billion quarterly profit | News

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Delta announces $1 billion quarterly profit
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ATLANTA -- Delta Air Lines reported $1 billion in adjusted net income, or $1.27 per share, during the second quarter, the company announced Wednesday.

That profit, based on lower-than-expected fuel prices and other operational savings, was 22% higher than the same months of April, May and June in 2014. The company returned $1 billion to shareholders through dividends and share buybacks.

"Delta's record results have allowed the company to invest in its employees through higher wage rates and profit sharing; improve the experience for our customers through new aircraft and innovative partnerships with global carriers; and uniquely deliver value for our shareholders by accelerating our capital returns while also paying down debt," CEO Richard Anderson said in a statement.

Atlanta-based Delta completed 99.8% of its flights during the quarter, with 43 days with zero cancellations for the mainline carrier, Anderson said.

"We continue to run the industry's best operation by far," Anderson told analysts.

J.P. Morgan analysts said the earnings beat expectations of a consensus of $1.21 per share. But in looking to the third quarter, analysts project earnings of about $1.65 per share based in part on fuel costs and also on pilots ratifying their contract, which hasn't happened yet.

Delta's earnings "modestly exceeded" estimates, according to Morgan analysts Jamie Baker and Mark Streeter.

On Friday, Delta pilots rejected a tentative contract with the company. Nearly two-thirds of pilots (65%) voted against the deal, with some voicing concerns about reduced profit-sharing.

Anderson said Wednesday the pilots are key stakeholders and leaders in the company, and that they would continue to work together.

"We were disappointed our pilots turned down the agreement," Anderson said. "We will continue to work together with them to find common solutions."

Delta's passenger revenue was relatively flat at $10.7 billion, or 0.8% higher than the same period a year earlier. While domestic passenger revenue grew 4.9%, passenger revenue for the Pacific region declined 11.8% and the Atlantic region declined 6.9%.

Delta is discussing investing in Japan's bankrupt Skymark Airlines, which would give the company greater access to that market. American Airlines has a joint-venture with Japan Airlines and United Airlines has a joint venture with All Nippon.

But Delta President Ed Bastian said Japan has unique attributes to investing that the carrier is still investigating.

"We're in the discussion phase," Bastian said.

Delta said it is strengthening its partnership with Gol Airlines in Brazil, and agreed to buy $56 million in preferred shares from the carrier and guarantee $300 million in carrier borrowing.

"We have the foundation for the strongest network in Latin America," Anderson said, combined with the relationship with Aeromexico.

Low fuel prices were a major factor in Delta's performance, with second-quarter costs totaling $463 million, which was lower than the same period in 2014.

Anderson said significant fuel savings in the current quarter should allow Delta to announce more record profits in July, August and September. Fuel expenses are projected at $1.90 to $2 per gallon for the rest of the year, the company said.

"Our commercial initiatives continue to gain traction in the marketplace and we will produce summer margins in excess of any achieved in our history," Bastian said.

Airline executives said the dispute with pilots shouldn't affect flights. The union's executive council plans a July 21 meeting to discuss strategy.

"We really need to hear back from them. I think the overarching story is that we have an incredible track record with them," Anderson said. "The relationship is still strong."

The performance extended a profitable streak of nine straight quarters for the airline. In the first quarter, Delta reported $746 million in net income, or 90 cents per share. The company returned $500 million to shareholders through dividends.

Delta is the first among major airlines to announce second-quarter earnings after the Justice Department announced that it was collecting information about possible collusion to limit competition.

But Delta announced in May that it would continue plans to boost competition in Seattle, which generated criticism from some Wall Street analysts.

Anderson declined comment on the Justice inquiry, but he said the airline provides "huge amounts of data" to the government and investors.

"We're going to always be transparent with our investors," Anderson said. "I don't think that there's any legal prohibition on being transparent."

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