Monday, January 17, 2011

Delta Air Lines (NYSE: DAL): Q4 Earnings Preview 2010

Delta Air Lines Inc. (NYSE: DAL), the world’s second-biggest carrier, is scheduled to release fourth-quarter earnings before the market open on Tuesday, January 18, 2011. Analysts, on average, expect the company to report earnings of 26 cents per share on revenue of $7.74 billion. In the year-ago period, the company posted aloss of 27 cents per share on revenue of $6.80 billion.

Delta Air Lines, Inc. provides scheduled air transportation for passengers and cargo in the United States and internationally. The Company’s route network is centered on the hub system it operate at airports in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York-JFK, Salt Lake City, Paris-Charles de Gaulle, Amsterdam and Tokyo-Narita.

In the preceding third-quarter, the Atlanta, Georgia-based company's net income was $363 million, or 43 cents a share, compared to a loss of $161 million, or 19 cents a share, in the prior-year quarter. On an adjusted basis, the company earned $1.10 a share in the latest quarter. Total operating revenue increased 18% to $8.95 billion from $7.57 billion in the same quarter last year. Analysts, on average, expected earnings of 93 cents a share on revenue of $8.82 billion. 

At its last earnings call in October, the company said that it expects demand strength through the holiday period and solid year over year unit revenue growth for the December quarter. For the fourth quarter, Delta projects operating margin between 6% and 8%, and capital expenditures to be $300 million.For the quarter, System capacity is expected to be up 5% to 7%, with 3% to 5% rise in domestic and 10% to 12% increase in International regions. The company's mainline capacity is expected to grow 6% to 8%.

Carriers of all stripes have been reporting improved traffic as demand for air travel bounces back from the recession. Delta Air Lines reported a higher traffic for the month of December 2010, on an increase in system capacity, though its load factor for the month declined from a year ago. System traffic for the month rose 2.4% to 15.04 billion RPMs, or revenue passenger miles, from 14.68 billion RPMs in the prior year comparable month. The company's system traffic for November increased 7.5%. The company reported a consolidated traffic increase of 8.6% on a capacity growth of 9.5% for the month of October. 

Early in January,  Delta Air Lines said that fourth- quarter profit would be about $45 million less than it expected because of December’s severe winter weather throughout the U.S. and Western Europe. The snowstorm that began on Christmas weekend and was centered in the Northeast U.S. forced Delta to cancel 3,000 flights with about 250,000 passengers, according to the airline.

Recently, the International Air Transport Association, or IATA raised its outlook for 2010 and 2011 industry profits, citing a rebound in demand for air traffic after the recession, but forecasts weak margins for both the years. IATA now sees 2010 industry profit of $15.1 billion, up from the prior forecast for a profit of $8.9 billion issued in September. Net margin or the year is forecast to be 2.7%. The industry group raised its forecast for passenger traffic growth for the year to 8.9% from the prior 7.7%, but maintained its outlook for passenger yield growth of 7.3%. For 2011, IATA now projects industry profit of $9.1 billion, up from the $5.3 billion forecast issued in September

In terms of stock performance, DAL shares have lost nearly 5 percent over the past year. 

Full Disclosure: None.
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