Delta Air Lines Inc.’s DAL air traffic numbers have been strong in the month of May. Traffic – measured in revenue passenger miles (RPMs) – stood at 18.2 billion, up 2.7% from 17.73 billion recorded in the comparable month a year ago.
On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) inched up 4% to 21.32 billion. Meanwhile, the load factor or percentage of seats filled with passengers decreased to 85.4% in the month from 86.5% a year ago.
At the end of the first five months of 2015, Delta generated RPMs of 81.3 billion (up 3% year over year) and ASMs of 98.2 billion (up 4.5% year over year). Load factor stood at 82.8% against 84% in May last year. Likewise, passenger count in the month grew 3.1% while that for the first five months of this year rose 3.9%.
However, Delta witnessed a 5.5% drop in PRASM (passenger revenue per available seat mile) in the month mainly impacted by volatile foreign currency exchange rates and lower surcharge from international destinations. Moreover, reduced passenger yields (average fare paid per mile, per passenger) from domestic markets affected PRASM.
Lower-than-expected passenger yield for the carrier has compelled Delta to slash its PRASM projection for the second quarter of 2015. Now, the company expects PRASM to drop in between 4% to 5%, highlighting a wider drop from the previous expectation of 2% to 4% decline. The disappointing forecast impacted the stock negatively.
Recently, Delta strengthened its Seattle network by adding five new routes. The company has already invested $15 million to improve facilities at the airport and plans to flag off nearly 128 fights from Seattle to 36 locations.
The company’s significant route expansion plans, introduction of ancillary products, fleet revamping and customer service enhancement bode well for the future. Further, the company has been reaping considerable benefits from its joint ventures and code share agreements.
Stocks to Consider
Delta Airlines currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Deutsche Lufthansa Aktiengesellschaft DLAKY, SkyWest Inc. SKYW and JetBlue Airways Corp. JBLU. JetBlue carries a Zacks Rank #2 (Buy) while the other two companies sport a Zacks Rank #1 (Strong Buy).
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