Like many of its competitors, Delta Air Lines ( DAL ) witnessed good earnings growth in the first half of the year, while recording a slowdown in earnings in the second half. A lethal combination of increased pricing pressures and flight cancellations due to the hurricanes were the main reasons behind this. In Q3, EPS was hit significantly; falling by almost 8%. That said, the management was quick to react to the problem, and are expected to steer the company back on track to return to strong earnings growth by early 2018. Despite this, the company managed to post amazing revenue growth throughout the year.
Key Highlights From The Year :
- In the year, the airline managed to complete its tender offer that resulted in a 49% ownership stake in Aeromexico. Delta formally launched its trans-border Mexican joint venture in the month of May. This partnership helped reinforce the company’s performance in the Latin American region, while helping grow its offerings further. Similarly, Delta signed a Memorandum of Understanding for a Trans-Pacific joint venture with Korean Airline, to enhance its strategic division across Asia. Both events come as welcome moves that have the potential to greatly improve revenues going forward.
- Delta struggled for over two years to get its unit revenue growing again after the 2014-2016 oil price crash that sparked a major price war among U.S. airlines. However, the company worked hard and finally pushed through the barrier this year. The airline achieved a 2.5% growth in the key metric that measures sales relative to flight capacity, on a 0.4% growth in capacity in Q2. What’s more commendable is the fact that the company has managed to keep the metric positive throughout the remainder of the year as well.
- In Q3, the company managed to increase net revenues by a significant 5.5%, marking the highest reported growth in several years. However, despite the brilliant top-line performance, costs came in higher than expected to hurt the bottom line significantly, as mentioned above. A sudden uptick in oil prices caused a $0.10 per gallon rise in fuel costs, while Hurricane Irma forced the airline to cancel thousands of flights, which hurt the operating income by about $120 million.
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.