Airline behemoth Delta Air Lines (DAL - Free Report) reported disappointing traffic data for the month of October.
Revenue passenger miles (RPMs) – a measure of air traffic – dipped 0.3% to 17.57 billion on a consolidated basis, while capacity (available seat miles/ASMs) expanded 1.7%. Load factor declined 180 basis points (bps) to 85.1% in the month as traffic contracted and capacity expanded, leading to relatively empty planes. The company registered a completion factor of 99.4% with 92.1% of its flights on schedule.
At the end of the first ten months of 2016, Delta reported a 1.7% increase in RPMs to180.67 billion and 2.4% rise in ASMs to 213.79 billion, both on a year-over-year basis. Load factor decreased 60 bps to 84.5% as traffic growth was outpaced by capacity expansion.
Consolidated passenger unit revenue (PRASM) declined 6.5% year over year in the month. The supply-demand imbalance in the Transatlantic region as well as headwinds related to holiday timing (to the tune of approximately 2 points) contributed to the decline. However, the company said that the decrease was in-line with expectations.
We note that unit revenue issues have been hurting the airline industry for quite some time. Apart from Delta Air Lines, its peers like American Airlines Group (AAL - Free Report) , United Continental Holdings (UAL - Free Report) and Southwest Airlines (LUV - Free Report) have also been suffering from unit revenue woes.
Passenger unit revenues in the fourth quarter are projected to decline in the band of 3–5%. The carrier expects to return to positive unit revenue growth by early next year.
Delta Air Lines currently carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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>>