* Quarterly revenue up 6 percent helped by US, Europe
* Refinery posts $3 million profit
* Says bookings for holiday season are strong
* Shares up nearly 4 pct to new high
By Karen Jacobs
Oct 22 Delta Air Lines Inc on Tuesday
reported a higher-than-expected quarterly profit as fare
increases and strong demand in the United States and Europe
boosted revenue, sending its shares up nearly 4 percent to a new
The U.S. carrier said its revenue outlook looked "solid"
through the end of the year and that bookings for the holiday
season were strong.
"Delta is leading the pack in unit revenue growth, in
executing and in creative thinking," said Jim Corridore, an
equity analyst with S&P Capital IQ. "Because of its strong cash
generation, the fact that it is well ahead of the competition in
its (merger) integration, it is able to do things that
competitors can't do."
Corridore said the performance in passenger revenue, which
rose nearly 11 percent domestically and 9 percent across Europe,
suggested that Delta gained market share. Yield, a gauge of the
average fare paid per mile flown, rose about 5 percent to 16.85
Delta, the second-largest carrier behind United Continental
Holdings, said the October government shutdown hurt
revenue by $20 million to $25 million. Still, it said margins
would expand in the current quarter.
The airline forecast an operating margin, a measure of
income to costs, of 7 percent to 9 percent, for the fourth
quarter. The upper end of that range is higher than some
analysts expected, such as Helane Becker of Cowen & Co, who had
forecast 7.1 percent.
Delta, which paid its first dividend since 2003 earlier this
year and was chosen to re-join the S&P 500 last month, has
upgraded aircraft seats and expanded Wi-Fi and entertainment
options to increase revenue. It has also formed partnerships
with non-U.S. airlines such as Britain's Virgin Atlantic Airways
to gain new passengers, and added flights in lucrative
markets such as New York.
Those moves paid off in the third quarter. Delta said
corporate revenue gains in banking, financial services and
healthcare helped drive the strength it had in the United
States, while its joint venture with Air France-KLM
bolstered results in Europe. The airline also cited a
"double-digit increase" in sales of seat-related products and
To pare costs, Delta has been retiring fuel-guzzling planes,
and it bought a Pennsylvania oil refinery last year that helped
lower fuel expenses (Story on refinery profit, ).
"We expect to set an all-time profit record for Delta in
2013 and in turn expect to improve on that performance in 2014,"
Chief Executive Richard Anderson said during a conference call.
Last week, American Airlines parent AMR Corp
posted a profit that topped estimates as revenue set a record.
The third quarter is traditionally a strong
period for U.S. airlines since it includes summer vacation
Net income at Delta came to $1.37 billion, or $1.59 a share,
in the third period, compared with $1.05 billion, or $1.23 a
share, a year earlier.
Excluding a fuel-hedging gain and a charge from changes in
Delta's fleet, profit was $1.41 a share, compared with the
analysts' average estimate of $1.36, according to Thomson
Revenue rose 6 percent to $10.5 billion, and passenger
revenue was up nearly 7 percent. Passenger revenue per available
seat mile, an important measure also called unit revenue,
increased 4 percent.
Shares of Delta were up 3.7 percent to $25.60 in afternoon
trading on Tuesday after reaching $26.24 earlier in the session.
Other U.S. airline stocks also rose, with United Continental
gaining 2.3 percent to $31.26 and US Airways Group up 2
percent at $21.64.