Airline behemoth Delta Air Lines, Inc.’s DAL key revenue metric – passenger unit revenue (PRASM, a product of passenger yield and load factor) – for the month of March 2015 suffered due to adverse foreign currency movements. The company stated, while reporting traffic figures for the month, that PRASM on a consolidated basis was flat year over year due to international weakness. On the domestic front, however, PRASM climbed 2.5%. A strong dollar negatively impacted international results.
In fact, currency headwinds have hurt international performance of the carrier through the entire first quarter of 2015. Unit revenue for the quarter declined 1.5% due to foreign exchange fluctuations which hurt international results. Domestic bookings were also short of the company’s expectations. The soft international numbers impacted the stock negatively which declined 2.33% to $42.25 on Apr 2.
Airline traffic, measured in revenue passenger miles, went up 2.5% year over year to 17.55 billion on a consolidated basis. Domestic traffic climbed 3.7% in the month, while the same on the international front was up a mere 0.7%.
Consolidated capacity or available seat miles improved 2.9% to 20.63 billion. Load factor (% of seats filled with passengers) stood at 87% for domestic flights, up 0.6% year over year. However, the metric declined 170 basis points (bps) to 82% for the month on international flights. Consolidated load factor was down 30 bps to 85%. The company registered a completion factor of 99.3%, with 84% of flights on schedule.
Delta further stated that it still expects operating margin for the first quarter in the band of 8% to 9% while system capacity is still projected to increase about 5%. Excluding $300 million of early fuel hedge settlements, operating margin for the quarter is estimated at roughly 11.5%. The projected fuel price now stands at approximately $2.90 to $2.95 per gallon (including taxes and hedges, previous guidance was $2.92 to $2.97).
Zacks Rank
Delta currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include JetBlue Airways Corp. JBLU, Alaska Air Group ALK and Southwest Airlines Co. LUV. JetBlue sports a Zacks Rank #1 (Strong Buy) while Alaska Air Group and Southwest Airlines carry a Zacks Rank #2 (Buy).
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