Delta Air Lines Inc. (DAL - Analyst Report) recently released the operating figures for September. The carrier reported a 3% decline in passenger revenue per available seat mile (PRASM: a measure of unit revenue). This is an improvement from the PRASM decline of 7% and 9.5% in July and August respectively, due to moderation in close-in domestic yield pressures due to application of lower fall capacity levels. However, supply-demand imbalance in Transatlantic sector as well as Yen hedge gains in the year-ago period continued to hurt PRASM.
Revenue passenger miles (RPMs) – a measure of air traffic – improved 1.4% to 17.60 billion, while capacity (available seat miles/ASMs) expanded 1.8% to 20.80 billion. In addition to PRASM, another important metric, load factor (percent of seats filled by passengers) declined by 40 basis points to 84.6% as traffic growth was outpaced by capacity expansion. The company registered a completion factor of 99.9%.
At the end of the first nine months of 2016, Delta generated RPMs of 163.10 billion (up 1.9% year over year) and ASMs of 193.14 billion (up 2.4% year over year). Load factor stood at 84.4% versus 84.9% recorded last September.
Delta Air Lines reiteratedits guidance for the September quarter,. The company expects the September quarter operating margin to be impacted by 1.5 points or $150 million mainly due to the power outage issue in August that disrupted several flight services. Operating margin is estimated in the range of 18–19%. PRASM too is expected to be adversely impacted by 1 point and decline around 7% for the September quarter. Per Delta Air Lines, system capacity in this period is expected to be up 1.5%. Cost per ASM, including profit sharing, is expected to remain flat year over year. The company was able to overcome a CASM-ex headwind of around 0.5 points from the technology outage issue. As a result, non-unit fuel costs remained in line with the initial guidance. The company expects to record almost $250 million in other expenses for the quarter. Delta had earlier also outlined that it expects its U.S. capacity to expand by only 2.5% in the final quarter of 2016.
Besides Delta Airlines, another U.S. airline, Southwest Airlines Co. (LUV - Analyst Report) had previously lowered its quarterly unit revenue guidance for the July end quarter due to a technology outage issue.
Zacks Rank and Stocks to Consider
Delta currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the airline sector include JetBlue Airways Corp. (JBLU - Analyst Report) and SkyWest Inc. (SKYW - Snapshot Report) . Both companies hold a Zacks Ranks #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
JetBlue Airways saw the Zacks Consensus Estimate increase by 2 cents over the last 30 days.
SkyWest witnessed a 1 cent rise in the Zacks Consensus Estimate over the last 60 days.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>