Delta Air Lines Q4 Results Top Estimates

(RTTNews) - Airline operator Delta Air Lines, Inc. (DAL), the first of the large US airlines to report fourth-quarter results, reported Tuesday a loss compared to a profit last year, as the company booked a hefty charge for fuel hedging.

However, adjusted earnings per share and quarterly revenues topped analysts' expectations, helped by a significant decline in fuel prices.

Atlanta, Georgia-based Delta Air Lines reported a net loss of $712 million or $0.86 per share for the fourth quarter, compared to net income of $8.48 billion or $9.89 per share in the prior-year quarter.

"Delta delivered solid revenue performance in the December quarter, growing our top line by 6 percent against a backdrop of nearly 15 percent lower fuel prices," President Ed Bastian said in a statement.

Results for the latest quarter include a $1.2 billion charge for mark-to-market adjustments on fuel hedges settling in future period, while the year-ago quarter included an $8.0 billion non-cash gain associated with the reversal of Delta's tax valuation allowance.

Excluding special items, Delta's adjusted net income for the quarter was $649 million or $0.78 per share, compared to $558 million in the year-ago quarter.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $0.77 per share for the quarter. Analysts' estimates typically exclude special items.

The company said the latest results include $262 million in profit sharing expense in recognition of Delta employees' contributions toward achieving the company's financial goals, compared to $262 million last year.

Total operating revenue for the quarter grew 6 percent to $9.65 billion from $9.08 billion in the same quarter last year, and topped fourteen Wall Street analysts' consensus estimate of $9.58 billion by a whisker.

Passenger revenues for the quarter rose 4.6 percent to $8.24 billion, and cargo revenues improved 2.1 percent to $243 million from the prior-year quarter, driven by increases in both freight volumes and yields. Other revenues totaled $1.17 billion, up 21 percent from last year, driven by higher joint venture and SkyMiles revenues as well as third-party refinery sales.

According to the airline, consolidated traffic grew 4.0 percent to 48.03 billion revenue passenger miles or RPMs, on a 3.7 percent growth in capacity to 58.03 billion available seat miles or ASMs. Passenger load factor reached 82.8 percent, up 0.2 percentage points from last year.

Consolidated Passenger Revenue per Available Seat Mile or PRASM, considered the best measure of revenue for airlines, edged up 0.8 percent to 14.19 cents from the prior-year quarter, while operating Cost per Available Seat Mile or CASM, grew 21 percent to 18.05 cents from 14.97 cents in the year-ago quarter.

Total operating expenses for the quarter grew 25 percent to $10.48 billion, primarily including aircraft fuel and related taxes expenses of $4.06 billion, up 83 percent from last year. Salary expenses also increased 7 percent to $2.04 billion from last year.

"As we begin 2015, we have a significant opportunity from lower fuel prices, which will drive more than $2 billion in fuel savings over 2014. Through our capacity discipline, pricing our product to demand, and the fuel savings, we expect to drive double-digit earnings growth, along with increased free cash flow and a higher return on invested capital in the upcoming year," CEO Richard Anderson stated.

The company added that it is confident it can continue to generate top-line growth as it realizes additional benefits from its Virgin Atlantic joint venture, restructuring of Pacific network, gain additional corporate share, and ramp up merchandising efforts with branded fares and enhanced customer segmentation.

Looking ahead to the first quarter, Delta forecasts operating margin to increase in a range of 11 to 13 percent, and system capacity is also forecast to grow about 5 percent.

DAL closed Friday's regular trading session at $45.84, up $0.84 on a volume of 13.01 million shares. In the past 52-week period, the stock has been trading in a broad range of $29.12 to $50.16.