July 14, 2016 / 12:17 PM / 3 years ago

Delta Air tops profit expectations, plans to curb growth

(Reuters) - Delta Air Lines Inc (DAL.N) on Thursday reported a higher-than-expected profit for the second quarter and said it would make fewer seats available to the United Kingdom and elsewhere than previously planned this autumn so ticket prices do not drop.

Delta planes line up at their gates while on the tarmac of Salt Lake City International Airport in Utah September 28, 2013. REUTERS/Lucas Jackson/File Photo

Atlanta-based Delta also said it would increase its flight capacity - its seats and how far it flies them - one percentage point less than it had expected for the fourth quarter to match reduced demand.

Some of the biggest cuts will involve the United Kingdom. Delta, The No. 2 U.S. airline by passenger traffic, said weaker sterling and economic uncertainty surrounding Britain’s upcoming exit from the European Union caused it to reduce U.S.-UK capacity by six percentage points for later this year.

The decision comes during heightened competition from transatlantic rivals. Delta has said flights added by the likes of Norwegian Air Shuttle ASA (NWC.OL) exceeded demand and threatened to drive down fares to Europe; U.S. airline unions have lobbied to block two of Norwegian’s subsidiaries from starting U.S. service as well.

In addition, “the large year-on-year savings driven by lower fuel are largely behind us,” Chief Executive Officer Ed Bastian said in a news release.

Concerns about rising oil prices, excess capacity and potential downturns that would hurt travel have lowered the industry’s shares, with Delta’s falling more than 20 percent this year.

The company’s stock was up 0.6 percent in premarket trading.

Delta said earnings rose 4 percent to $1.55 billion in the second quarter from a year earlier.

Excluding special items such as settled fuel hedges, the profit came to $1.47 per share. Analysts on average expected $1.42, according to Thomson Reuters I/B/E/S.

U.S. airfares close to departure dates have fallen. That, along with sales in foreign currencies weakening against the U.S. dollar, has contributed to a decline in passenger unit revenue for more than a year.

For Delta, the closely watched revenue measure fell 4.9 percent in the quarter. It expects a drop of 4 percent to 6 percent for the third quarter.

In a research note, Cowen and Co analyst Helane Becker called the capacity actions “a positive” but said the airline’s third-quarter outlook was slightly worse than expected.

President Glen Hauenstein said Delta maintained its goal of positive unit revenue by year-end.

The company said it expected an operating profit margin of 19 percent to 21 percent for the third quarter.

Reporting by Jeffrey Dastin in San Francisco; Editing by Lisa Von Ahn

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below