Delta reported GAAP and adjusted pre-tax income of $1.9 billion and produced a 19 percent GAAP and adjusted operating margin for the third quarter of 2016.
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The airline was able to generate $1.9 billion of operating cash flow, and $1.1 billion of free cash flow in the third quarter after investing $680 million in aircraft purchases and improvements, facilities upgrades and maintenance part-out initiatives.
It also returned $650 million to shareholders and added $325 million to next year’s employee profit sharing payout.
Despite four days of operational impacts from the technology outage in August that reduced pre-tax income for the quarter by an estimated $150 million, Delta people managed to achieve 99 percent completion factor and an 84 percent on-time rate.
And of the 22 “brand perfect” days where 100 percent of mainline and Delta Connection flights were completed, 21 occurred after the outage.
Delta saw a 6.8 percent year-over-year dip in passenger unit revenues – the amount of money collected for every mile each seat is flown – for the quarter but attributed two points to the technology outage and prior year Yen hedge gains.
President Glen Hauenstein said, “With further slowing of our capacity growth in the December quarter and additional traction on our revenue management initiatives ... we expect our December quarter unit revenues to decline by 3-5 percent year over year.”
After growing capacity conservatively at 1.5 percent for the September quarter, Delta plans to slow growth to 1 percent for the December quarter and into 2017 so it can get back to positive unit revenues, likely sometime early next year.
While Delta’s fuel expense declined $424 million and adjusted fuel expense* declined $348 million compared to 3Q15, the airline expects market fuel prices to be higher year over year in the December quarter for the first time in several years. ■