Delta posts annual earnings gain

Confirming the rebound in US airline profitability

Image Credit: AP
Travellers wait for flights in Detroit. Delta said Superstorm Sandy hurt fourth-quarter profits by$100 million. That, plus special charges, left Delta with a profit of just $7 million.
Gulf News

Delta Air Lines, the world’s biggest airline by revenues, confirmed the rebound in US airline profitability when it reported net income for 2012 up 18 per cent to $1.01 billion (Dh3.7 billion) on revenues up 4 per cent to $36.7 billion.

However, fourth-quarter net income fell to $7 million from $25 million on revenue up 2 per cent to $8.6 billion, after $231 million of special charges. The special charges included a $106 million loss on the early retirement of some debt and $122 million related to the company’s fleet restructuring, in which it has shed some of its least efficient aircraft and taken on other airlines’ MD 90 and Boeing 717 aircraft.

The fourth-quarter figures included a $75 million reduction in airline revenue as a result of October’s superstorm Sandy in the northeast US. The storm also reduced by $25 million revenue for the Trainer refinery, near Philadelphia, which Delta bought last April in a bid to manage its fuel costs better.

Fuel costs for the fourth quarter rose 18 per cent from 2011 to $2.39 billion, while staff costs rose 7 per cent to $1.83 billion.

Despite rising fuel costs, the US’s surviving legacy airlines have experienced returns to solid profitability over the past year as a decade of bankruptcies, mergers and restructurings has finally started to produce results.

Stronger recovery

Delta is the first listed operator among the legacy airlines to report its 2012 results. American Airlines, currently in Chapter 11 bankruptcy protection, reported a still stronger recovery last week.

Richard Anderson, chief executive, said the December quarter “capped off” a successful 2012 for Delta, when it achieved strong financial results, industry-leading operational performance and across-the-board improvements in customer satisfaction.

“We enter 2013 as a stronger airline, with initiatives in place to build on our 2012 success,” he said.

Delta’s passenger revenue per available seat mile (Prasm) — the key measure of airlines’ unit revenues — was 4.3 per cent up overall in the fourth quarter, 5.3 per cent up on domestic routes and 7.9 per cent up on transatlantic routes, where Delta cut capacity 6.8 per cent. However, Prasm was flat on trans-Pacific routes and fell 1.4 per cent in Latin America.

The company forecast overall Prasm for the current quarter would be 4 to 6 per cent up on the same quarter of 2012, although it said unit costs would rise by 6 to 8 per cent.

Ed Bastian, Delta’s president, said the company’s investment programme and its discipline about capacity had produced unit revenue growth faster than the wider industry for 21 consecutive months.

“We have built strong revenue momentum going into the year with our customer-focused initiatives, corporate share gains, and capacity actions,” he said.