Delta Airlines Inc.

Delta Airlines, Inc. (DAL - Snapshot Report) is on the verge of a very lucrative merger with Northwest Airlines. The carrier's international expansion strategy is working as analysts estimates have been rising. Delta is now the fastest growing major carrier in the United States.

Company Description

Delta Air Lines is an international airline with more destinations than any other global carrier. The company offers flights to approximately 311 cities in 52 countries. Delta added 60 new international flights in the past year, making it the fastest growing U.S. airline. The company employs more than 55,000 people, carries a market cap of $2.6 billion, and his headquartered in Atlanta, Georgia.

Advisors Recommend Delta-Northwest Merger

On September 15th Delta announced that proxy advisors recommended Delta shareholders should vote for the proposed all-stock merger with Northwest Airlines. If the merger is approved by shareholders, the combined airline will provide service to over 390 destinations in 67 countries.

Stockholders are scheduled to meet on September 25th to vote on the transaction. The resulting company would be called Delta and continue to be headquartered in Atlanta. Delta, after combining with Northwest, would have one of the industry's strongest balance sheets, will be able to provide unparalleled service to customers, and offer the most international flights of any carrier.

Estimates Continue to Climb

While many analysts are still projecting a net loss for the near future, the estimates continue to increase. The consensus earnings estimate for the current quarter is a loss of three cents up from a loss of 35 cents just 60 days ago. Over the same period of time, the loss expected by analysts has been cut in half, now a loss of 96 cents from $1.82.

Favorable Industry Comparisons

Delta is the top rated airline and is currently poised to turn the corner as it prepare to merge with Northwest. The company's price-to-book is just .66 compared to the industry average of 1.27.

Despite the struggles expected in the near future, Delta has an expected earnings growth rate of 46% for the next 3 to 5 years. The company has a very low debt-to-equity ration of 2.2, compared to the industry average of 57.6.

Record August Traffic

On September 4th the company announced a record number of international passengers with a year over year increase of 17.4%, with capacity up 15.1%.

Domestic traffic was down, however due to decreased capacity, Delta saw an increase in year-over-year yields. The company continues to place an emphasis on international travel, especially transatlantic flights.

Baggage Fees Used to Offset Sky-High Fuel Prices

Delta increased fees, effective as of July 31st, for excess baggage and other items. Customers on domestic flights will still be able to check the first bag at no charge, but will now pay $50 per additional bag, up from $25. Specialty items that require additional care will also see an increase in fees.

If you have not seen a paper in the past 12 months, fuel prices have spiked approximately 75% since last year. Delta, as well as other carriers, are seeking other sources of revenue to counteract the additional costs.