NEW YORK: Delta Air Lines Inc on Sunday said its third-quarter unit revenue continued to fall during the year’s busiest travel season but hinted that financial metrics were already improving.
The Atlanta-based airline said passenger unit revenue, which measures sales relative to the capacity and distance of flights, declined between 4.5 and 5.5 percent, compared with earlier guidance of a 4.5 to 6.5-percent drop.
For months, Delta and rivals American Airlines Group Inc and United Continental Holdings Inc have seen steep declines in unit revenue as a strong U.S. dollar hurt travel demand abroad and smaller surcharges in international markets decreased the value of sales.
Yet the industry has taken steps to reduce fall and winter capacity to match lower demand, which analysts say should help unit revenue. According to Sterne Agee CRT analyst Adam Hackel, the unit revenue decline likely reached its bottom in the third quarter.
Delta said it expects third-quarter operating profit margin, adjusted for the changing market value of its fuel hedges, to be between 20 and 21 percent, compared with 15.8 percent a year earlier.
Margins have benefited because the cost of fuel – typically a third of airlines’ operating expenses – has fallen dramatically from a year ago. Delta said it paid between $1.80 and $1.85 per gallon on average in the third quarter.
However, the airline said unit costs excluding fuel, profit-sharing and other expenses grew about 1 percent in the quarter. JPMorgan analyst Jamie Baker said in a research note that unit costs will likely rise about 2 percent in the fourth quarter because Delta has hiked non-pilot salaries.
