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Delta Air Lines January Load Factor Declines, PRASM Down
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Atlanta, GA-based Delta Air Lines (DAL - Free Report) unveiled disappointing traffic data for Jan 2017. Consolidated traffic — measured in revenue passenger miles (RPMs) — came in at 15.6 billion, up 0.4% year over year. While domestic RPMs climbed 3.1%, it declined 3.6% on the international front.
On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) improved 0.6% to 19.3 billion. The metric expanded 3.4% domestically but contracted 3.7% on the international front. Moreover, the load factor, or percentage of seats filled by passengers, decreased to 81.2% from 81.3% recorded a year ago. This is because capacity expansion outweighed traffic growth for the month.
Consolidated passenger unit revenue (PRASM: a key measure of unit revenue) declined 2.5% year over year in the month. Winter storm Jonas had a negative impact on the metric. Delta expects the metric to improve in February and March as PRASM for the first quarter is projected in the range of flat to a 2% increase in the first quarter.
We note that Delta is not the only company to have come up with an upbeat unit revenue guidance. Peers like United Continental Holdings (UAL - Free Report) and American Airlines Group (AAL - Free Report) are also bullish on the metric as they strive to return to unit revenue growth.
Capacity Related Fears Haunt Investors
Delta’s January traffic report indicated domestic capacity expansion and contraction internationally. This was quite similar to the commentary issued by American Airlines last month, while releasing fourth-quarter results, wherein it had hinted at increasing domestic capacity while reducing the same internationally in 2017. Following the update, airline stocks lost substantially on investor fears that capacity-related woes would plague the industry again.
Apart from capacity-related fears, technological glitches have been hurting airline stocks of late. Over the last one year, some major carriers like Southwest Airlines (LUV - Free Report) have been adversely impacted by technological issues. Delta Air Lines was the latest victim of a disruption in operations due to technological failure. The carrier suffered a computer outage on Jan 29, leading to cancellation of multiple flights. The issue, however, has been resolved. Given that technological infrastructure is a key expense for airlines, profitability of carriers could be affected in the event of such malfunctions.
Price Performance
Delta’s moderate fourth-quarter earnings report, released last month, the technological failure and unimpressive January traffic data, were the reasons for the stock underperforming the Zacks categorized Transportation-Airline industry over the last one month. The stock lost 3.78%, while the industry increased 1.4% over the same period.
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Delta Air Lines January Load Factor Declines, PRASM Down
Atlanta, GA-based Delta Air Lines (DAL - Free Report) unveiled disappointing traffic data for Jan 2017. Consolidated traffic — measured in revenue passenger miles (RPMs) — came in at 15.6 billion, up 0.4% year over year. While domestic RPMs climbed 3.1%, it declined 3.6% on the international front.
On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) improved 0.6% to 19.3 billion. The metric expanded 3.4% domestically but contracted 3.7% on the international front. Moreover, the load factor, or percentage of seats filled by passengers, decreased to 81.2% from 81.3% recorded a year ago. This is because capacity expansion outweighed traffic growth for the month.
Consolidated passenger unit revenue (PRASM: a key measure of unit revenue) declined 2.5% year over year in the month. Winter storm Jonas had a negative impact on the metric. Delta expects the metric to improve in February and March as PRASM for the first quarter is projected in the range of flat to a 2% increase in the first quarter.
We note that Delta is not the only company to have come up with an upbeat unit revenue guidance. Peers like United Continental Holdings (UAL - Free Report) and American Airlines Group (AAL - Free Report) are also bullish on the metric as they strive to return to unit revenue growth.
Capacity Related Fears Haunt Investors
Delta’s January traffic report indicated domestic capacity expansion and contraction internationally. This was quite similar to the commentary issued by American Airlines last month, while releasing fourth-quarter results, wherein it had hinted at increasing domestic capacity while reducing the same internationally in 2017. Following the update, airline stocks lost substantially on investor fears that capacity-related woes would plague the industry again.
Apart from capacity-related fears, technological glitches have been hurting airline stocks of late. Over the last one year, some major carriers like Southwest Airlines (LUV - Free Report) have been adversely impacted by technological issues. Delta Air Lines was the latest victim of a disruption in operations due to technological failure. The carrier suffered a computer outage on Jan 29, leading to cancellation of multiple flights. The issue, however, has been resolved. Given that technological infrastructure is a key expense for airlines, profitability of carriers could be affected in the event of such malfunctions.
Price Performance
Delta’s moderate fourth-quarter earnings report, released last month, the technological failure and unimpressive January traffic data, were the reasons for the stock underperforming the Zacks categorized Transportation-Airline industry over the last one month. The stock lost 3.78%, while the industry increased 1.4% over the same period.
Zacks Rank & Another Key Pick
Currently, Delta has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>