Delta profit tops view, plans to curb flight capacity

Thu Oct 13, 2016 2:21pm EDT
 
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By Jeffrey Dastin

(Reuters) - Delta Air Lines Inc (DAL.N: Quote) on Thursday said it will add fewer seats for purchase than usual in early 2017 to prop up fares, reacting to a deluge of flights from rivals that is squeezing its profit margins.

Delta, No. 2 globally in passenger traffic after American Airlines [AAMRQA.UL], said income fell about 4 percent to $1.3 billion in the third quarter. That nonetheless topped what analysts expected per share on an adjusted basis, according to Thomson Reuters I/B/E/S.

While plummeting fuel costs led to a blockbuster rise in U.S. airline profits since 2014, oil prices have to a degree plateaued and no longer are a force to improve the sector's results.

At issue now is lower revenue. Budget carriers like Norwegian Air Shuttle ASA NWC.OL are fighting larger airlines over a fixed number of travelers and charging less per ticket.

Delta said it expects its operating profit margin, excluding items, to shrink to between 14 percent and 16 percent in the fourth quarter from 17.1 percent a year earlier. If pilots approve a union-negotiated contract, analysts said the margin will be lower still.

In addition, the third quarter was "the weakest revenue environment in recent memory," Chief Executive Officer Ed Bastian said on an analyst conference call.

Trans-Atlantic flights earned less than expected because attacks in Europe discouraged would-be vacationers, Delta's President Glen Hauenstein said.

Norwegian also began flights from New York to Paris, a hub city for Delta's partner Air France KLM SA (AIRF.PA: Quote), increasing competition for price-sensitive customers.   Continued...

 
A Delta Airlines Embraer 175, with Tail Number N604CZ, lands at San Francisco International Airport, San Francisco, California, April 14, 2015.   REUTERS/Louis Nastro