DL beats estimates, improves profit

[WorldTraveler]

http://finance.yahoo.com/news/delta-air-lines-announces-march-113000867.html

key takeaways

DL's profit increased year over year and beat estimates.

RASM was down 1.7%, most of which was driven by foreign currency results - but 10% of DL's costs are not in dollars (probably heavily Japan employees) and non-fuel CASM was down 1%.

DL employees earned $136 million in profit sharing.

Fuel hedge losses are about half of DL's total pre-tax profits.

The Pacific is the weak region but was offset by revenue growth in all other regions.

The refinery was profitable and the profit amounted to approx. 5% of DL's fuel costs.

DL made $900M in pension payments

 

[commavia]

So anyone know how the 15-20% reductions in W14/15 capacity in Japan, Brazil and Africa/India/Mid East are going to be distributed (i.e., which routes will see smaller aircraft vs which routes/cities will be eliminated entirely)?

 

[WorldTraveler]

Brazil and Japan are largely due to smaller gauge while other regions are largely due to reduced frequencies. DL eliminated a tag in Africa.

DL is suspending India flights (AMS-BOM) if you remember.

Capacity to Russia is also down.

 

[STIS]

Brazil and Japan are largely due to smaller gauge while other regions are largely due to reduced frequencies. DL eliminated a tag in Africa.

DL is suspending India flights (AMS-BOM) if you remember.

Capacity to Russia is also down.

Yeahhhhhhh boi you always makin' excuses about how Delta gon RUN IT UP SON
 
Now all I hear are excuses about Delta SHUTTIN IT DOWN BOY 
 
Where dat Pacific domination at?  Ain't happenin in the ATL dat's fo sho.  Maybe some massage parlor or sumthin like dat HAHAHAHA
 
Make you think you dont know shizz huh homie?
 
~~STIS~~

 

[WorldTraveler]

someone has flipped their lid.

let's wait and see what other carriers do.

Wall Street is happy that DL is cutting capacity and waiting to see if UA and AA will do the same; seems to me they have no choice.

and DL's relative position likely will be just as good when AA and UA cut capacity.

and they will.

by going first and telling Wall Street what they want to hear, DL sets the guide for capacity in the offpeak seasons which puts AA and UA in the position of either not doing what Wall Street wants, proving that they don't need to do it, or cutting capacity which benefits everyone.

There are only 3 legacy carriers in the US now. It's pretty easy to point fingers when one carrier is putting more capacity in the market than is justified, regardless of fuel prices.

 

[700UW]

To address currency headwinds, Delta plans to reduce its international capacity by 3 percent year over year for the winter schedule. These international reductions, combined with 2 percent domestic growth, will result in flat system capacity for the December quarter. Capacity adjustments will be focused on markets that have been most affected by the strong dollar and markets where demand has been negatively impacted by the decline in oil prices. Key actions for the December quarter will include a 15-20 percent reduction in service from Japan, a 15 percent reduction to Brazil, a 15-20 percent reduction to Africa, India and the Middle East, and suspension of service to Moscow for the winter season.
 

 

[WorldTraveler]

DL said that, other than the seasonal reduction to SVO, there will be no further route cancellations. DL will reduce capacity through downgauging and reduced frequencies.

I would strongly bet that the new high gross weight 333s - of which there will be 5 in the fleet by the end of the year - will play a role in the downgrading, esp. at NRT where they will free up 777s; even though the 333 and 777 are similar sized, the 333 is a lot lower cost airplane. Also, DL will move into the 2nd phase of parking 744s with more than half of the fleet gone by the end of the year.

and as I have noted before, tourism is heavily skewed TO the US in the winter and FROM the US in the summer - so DL's cuts make a lot of sense in markets which are heavily dependent on inbound tourism.

It's also worth noting that, going into the final hour of trading on Wall Street, DL and UA stock are leading the industry up with the market cap difference between AA and DL now approaching 10%.

 

[STIS]

Dis homie mad as all Ferguson.

World traveller you gotta get laid son

 

[WorldTraveler]

someone is just plain jealous that someone understands the industry and has been calling it right for years on this forum.

 

[topDawg]

Congrats to all the Delta employees. Should be another great feb 1st next year. 


 

So anyone know how the 15-20% reductions in W14/15 capacity in Japan, Brazil and Africa/India/Mid East are going to be distributed (i.e., which routes will see smaller aircraft vs which routes/cities will be eliminated entirely)?

Japan will be beach market reductions in capacity. With the 744 going away Hawaii-Japan will likely be going all 330 or 767 Also wouldn't shock me to see the 333 go to MSP-NRT so that 777 can cover DTW-NRT. Leaving the 744 for DTW-ICN/PVG and Europe. 
Brazil, expect the 764 to go away and 763s to take over ATL-GRU #1 and JFK-GRU. ATL-BSB will probably end up going 75S from the current 763. 
India/Africa/Middle east, its such a small region for Delta at this point, AMS-BOM cut probably did it.

 

[WorldTraveler]

Seeking Alpha has posted DL’s earnings call transcript from earlier today.
http://seekingalpha.com/article/3072926-delta-air-lines-dal-ceo-richard-anderson-on-q1-2015-results-earnings-call-transcript
 
Looking at June quarter operating margins of 16% to 18%; over $1.5 billion of free cash flow in the June quarter.

Starting July 1, we will have significant tailwind for fuel with fuel prices 25% lower than what we will pay in the first half of the year.

This year we expect to generate $4 billion to $5 billion in free cash flow after those investments, less than 10% of the S&P 500 generate free cash flow at this level.

The quarter we had $1.1 billion in hedge losses, thus to give you a better sense of the core performance of the business. With market fuel prices our margin for the quarter is 17.8% among the best in the industry.
Seattle expansion is performing well with domestic unit revenues up 2% on 55% higher capacity.
JFK long haul markets, especially the Transcons performing well based on corporate gains in New York and Los Angeles.

Relationships with Air France, KLM, and Virgin Atlantic allowed us to expand margins despite significant currency pressure on the euro and pound.

Yen revenue had a headwind in the quarter of $40 million net of hedges. For the remainder of 2015, our Yen hedges are valued at about $110 million.

Excluding hedges our second quarter margins are expected to be north of 20%.

DL is of the lifting of the LGA perimeter rule. We will use 767ERs and 757s to serve both airports from the West Coast.

The strongest margins are -- it will continue to be in Europe despite the weakness in the euro. Heathrow is doing fabulously. We have a great relationship and again strong partnership in -- with Air France KLM and Alitalia, so the continents also looking very, very solid and very strong.

Absent Brazil which is having some real struggles, the majority of Latin America is doing very well. In the Pacific business we're in the midst of our restructuring, and I think you have to wait to see the effects of that by the end of the year about summer.

We've seen a very tight correlation between improvements in our unit revenue performance that's directly attributable to customer satisfaction and net promoter score. In the first quarter, our overall unit revenue performance on the domestic was 115, indexed against our competitors, which is substantial, and we had close to 40% net promoter score in the first quarter as well on the domestic business.

For the 2014 domestic performance, we had 197 days last year with perfect completion; If you were to add Southwest American and United combined in 2014, their total number was 13.

There was a side letter signed between the United States' government and the Mexican government that basically condition to the Open Skies on ATI. This is very common. This is what the United States' government did with Japan and has done another Open Skies regimes.

 

[FrugalFlyerv2.0]

The quarter we had $1.1 billion in hedge losses,

 
OUCH!!
 

Seattle expansion is performing well with domestic unit revenues up 2% on 55% higher capacity.

WOW!  That's a lot of seats in SEA.
 
 

Yen revenue had a headwind in the quarter of $40 million net of hedges. For the remainder of 2015, our Yen hedges are valued at about $110 million.

OUCH!
 
 

We have a great relationship and again strong partnership in -- with Air France KLM and Alitalia, so the continents also looking very, very solid and very strong.

Initially, I would call this BS as Italy and France and AF/KL and AZ have been a mess in recent years.  But given that even IAG managed to stabilize and turn IB around, I'm gonna take this with just a small chunk of salt.
 
 
 

Absent Brazil which is having some real struggles, the majority of Latin America is doing very well.

OhOh!!! 
Looks like another WT myth has been shattered.
I guess this bodes well for AA too (unless ofcourse the resident DL fankid cheerleader World Fraudster fabricates a disclaimer for this to not apply to AA.
 

For the 2014 domestic performance, we had 197 days last year with perfect completion; If you were to add Southwest American and United combined in 2014, their total number was 13.

 
This is something that each and every DL employees should be very proud of.
Congrats, great job!!!

 

[Kev3188]

Absent Brazil which is having some real struggles...

Heh.

 

[topDawg]

For the 2014 domestic performance, we had 197 days last year with perfect completion; If you were to add Southwest American and United combined in 2014, their total number was 13.
 

Boom mother f&&kers I am very proud of this stat
 
 
I also want to point out that my peers at TechOps are taking names and kicking asses. The MRO is growing again, 330 C-checks are doing great. Hopefully we can add a few more customers because of these numbers. 

 

[topDawg]

 
OUCH!!
 
WOW!  That's a lot of seats in SEA.
 
 
OUCH!
 
 
Initially, I would call this BS as Italy and France and AF/KL and AZ have been a mess in recent years.  But given that even IAG managed to stabilize and turn IB around, I'm gonna take this with just a small chunk of salt.
 
 
 
OhOh!!! 
Looks like another WT myth has been shattered.
I guess this bodes well for AA too (unless ofcourse the resident DL fankid cheerleader World Fraudster fabricates a disclaimer for this to not apply to AA.
 
 
This is something that each and every DL employees should be very proud of.
Congrats, great job!!!

I have been at Delta for a long time and I have never seen a management team so focused on operations like this one. I knew Richard was an operations guy, but they have really been driving at being the number 1 airline in operational stats. 
 
I am simply amazed by the turn around of Delta...