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Delta Air Lines Q2 adjusted net income up 22%

Staff writer |
Delta Air Lines reported financial results for the June 2015 second quarter, including adjusted net income of $1 billion or $1.27 per diluted share, up 22% from the June quarter of 2014.

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Delta's operating revenue for the June quarter increased 1%, despite $160 million in foreign currency pressures which reduced unit revenues by approximately 2 points. Passenger unit revenues declined 4.6% on a 3.9% decline in yields.

Delta saw solid progress with several of its revenue initiatives, including Branded Fares, which increased passenger revenues by $56 million, and its enhanced agreement with American Express, which produced an incremental $60 million in revenue.

Strengthening its existing partnership with GOL, Delta recently agreed to purchase up to $56 million in preferred shares as part of a larger rights offering by the Brazilian carrier.

In addition to the equity, Delta will guarantee up to $300 million in borrowings by GOL under a term loan with third-party lenders. Delta's guarantee will be secured by GOL's interest in SMILES, GOL's publicly-traded loyalty program.

Delta and GOL have also agreed to extend their exclusive commercial agreement for flights between the United States and Brazil, the largest aviation market in Latin America. This transaction is subject to normal closing conditions, including regulatory approvals.

Adjusted fuel expense declined over $463 million compared to the same period in 2014, as 39% lower market fuel prices and a $77 million increase in profit at the refinery offset nearly $600 million in settled hedge losses.

For the remainder of 2015, Delta expects its fuel expense to be $1.90 – $2.00 per gallon, a significant reduction to the $2.65 per gallon it realized in the first six months of the year.

CASM-Ex3 decreased 0.8% for the June quarter on a year-over-year basis, with 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.

This marks the eighth consecutive quarter of CASM growth below 2%, in line with the company's long-term goals.

Delta's debt reduction initiative continued to improve the company's interest expense, producing $46 million in interest savings for the quarter compared to the same period in 2014.

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