Delta Air Lines reported financial results for the March 2015 quarter. Delta's operating revenue improved 5 percent, or $472 million, compared to the March 2014 quarter.
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Traffic increased 3.6 percent on a 5 percent increase in capacity, which includes 2 points due to capacity removed in the first quarter of 2014 as a result of winter storms. Foreign exchange pressured revenue by $105 million for the quarter.
Passenger revenue increased 3 percent, or $246 million, compared to the prior year period. Passenger unit revenue (PRASM) decreased 1.7 percent year over year primarily dri
ven by 1.5 points of negative foreign exchange impact
Cargo revenue was unchanged from the prior year period as higher volumes offset lower yields.
Other revenue increased 22 percent, or $226 million, driven by SkyMiles revenues and third-party refinery sales.
Adjusted fuel expense2 increased $23 million as lower market fuel prices were offset by $1.1 billion of settled hedge losses, including $300 million of early settlements of contracts originally settling in the second half of 2015 as the company restructured its hedge book. Delta's average fuel price was $2.93 per gallon for the March quarter. Operations at the refinery produced an $86 million profit for the March quarter, a $127 million improvement year-over-year.
Consolidated unit cost adjusted for fuel expense, profit sharing and special items (CASM-Ex3), was down 1.4 percent in the March 2015 quarter on a year-over-year basis, with higher capacity, foreign exchange and the benefits of Delta's domestic refleeting and other cost initiatives offsetting the company's investments in its employees, products and operations.
Cash from operations during the March 2015 quarter was $1.1 billion and free cash flow was $511 million, driven by the company's March quarter profit and the normal seasonal increase in advance ticket sales. Cash flow from operations and free cash flow exclude the return of fuel hedge margin posted. Capital expenditures during the March 2015 quarter were $586 million, including $411 million in fleet investments. During the quarter, Delta's net debt and capital lease maturities were $260 million.
With its strong cash generation in the March 2015 quarter, the company returned $500 million to shareholders. The company paid $75 million in cash dividends and repurchased 9.3 million shares for $425 million. Delta also made over $900 million in pension contributions during the quarter.
Delta ended the quarter with adjusted net debt4 of $7.4 billion, including cash held by counterparties as hedge margin. The company has achieved nearly $10 billion in net debt reduction since 2009, resulting in a roughly 50% reduction in annual interest expense.
On a GAAP basis compared to the March 2014 quarter, consolidated CASM declined 8 percent, total operating expense was down $306 million, and fuel expense declined $600 million.
GAAP fuel cost per gallon for the quarter was $2.29. Non-operating expenses for the quarter decreased by $73 million. Cash from operations for the March 2015 quarter was $1.6 billion and the company ended the quarter with debt and capital lease obligations of $9.6 billion on a GAAP basis. ■