FWAAA,
Thanks for posting….
Yes, DL did fairly well … beat analyst estimates…. Couple observations.
1. Most airlines covered the increased cost of fuel through fare increases.
2. DL’s RASM production was at or above average…. Domestic was mid-tier between AA and UA and comparable to US. DL’s Pacific and Latin RASM growth was double digit, comparable to UA. DL’s Atlantic RASM growth was negative on double digit more capacity…. Clearly DL is going to be chopping at transatlantic capacity this coming winter.
3. DL’s non-fuel CASM was about 4% although they said about half was related to the US and Japan natural disasters/storms etc. that says the DL pay increases amounted to at most a couple percent.
4. DL paid down some debt during the quarter. DL has below average cash on hand but a hefty $1.5B plus line of credit which is undrawn.
5. DL is expecting double digit RASM growth for the 2nd quarter and a reasonable operating profit.
6. DL’s fuel cost per gallon was the highest of the big 3 and about the same as US which didn’t hedge at all…. Not sure how they got no benefit but they may be limited close-in hedges in favor of buying fuel out right on contract earlier, perhaps which US also did. DL’s hedges for the 4th quarter appear to be less than AA and UA’s possibly indicating DL is not being as aggressive in hedging as others. AA, DL, and UA all appear to have comparable hedges for the 2nd quarter.
7. DL in my mind has three major revenue challenges coming up… 1. getting Japan travel up and running again and using the NRT hub and the stronger, undamaged economies beyond Japan to boost traffic through NRT in the months ahead (this is just the opposite situation as happened with the Bird flu crisis when Japan was strong but other parts of Asia were severely hurt by the flu crisis). 2. Get the HND routes going enough to hold onto the authority – although I fully expect DL will pull the capacity down again at least by late fall/winter. 3. Get the new LHR flights out of the money losing column which is where they certainly are now; although they are strategically necessary for DL to expand its LHR presence, they cannot afford given the weak transatlantic environment to carry any dead weight to Europe – but that’s also probably why they will hack at other transatlantic capacity in order to be able to support the LHR flights…. DL has a lot of high risk developmental flying this year in light of high fuel costs and weakening demand due to fare increases.
I haven’t listened to the conference call… add any comments you have from it or otherwise.
