Delta exceeds the earnings forecast on strong demand while rivals fight the 737 MAX crisis

CHICAGO (Reuters) – Delta Air Lines Inc on Tuesday reported a fourth-quarter gain that exceeded estimates, driven in part by customers who got 737 MAX cancellations from rival airlines and rising demand for air travel.

FILE PHOTO: A Delta Air Lines flight is pushed out of your door at Salt Lake City, Utah, USA. UU., January 12, 2018. REUTERS / Mike Blake / File Photo

Delta shares rose more than 3% in pre-market trade.

Airlines that own the Boeing Co 737 MAX are canceling more than 10,000 monthly flights in total since the plane remains on the ground after two fatal accidents.

Delta does not operate the MAX, which allows it to expand its flight capacity and capture new customers, even when peers like Southwest Airlines Co have had to reduce their scale.

Delta’s net income, based in Atlanta, increased 8% to $ 1.1 billion in the quarter as of December 31 compared to the previous year. Adjusted earnings per share reached $ 1.70, exceeding analysts’ expectations of $ 1.40 per share, according to Refinitiv IBES data.

Total operating revenues increased 7% to $ 11.4 billion.

“There is no doubt that we are picking up new customers, but that is not the main driver of our performance,” Bastian told Reuters, citing strong customer loyalty at a time when demand for air travel continues to rise.

“The underlying environment remains favorable for Delta, as they continue to benefit from slower than normal industry capacity growth in the domestic market due to the 737 MAX base,” said Cowen analyst Helane Becker.

Lower fuel costs and a profit of 9 cents per share from the sale of its stake in the Brazil Goal also increased profits.

In the first quarter, Delta expects revenue growth from 5% to 7% year-on-year as US demand increases. UU. Despite rising geopolitical tensions. Revenue per mile of available seat is flat at 2% higher and unit costs without fuel increase from 2% to 3%.

Delta, the first of its peers to report quarterly results, generated $ 4.2 million of free cash flow for the year, a number that it expects to repeat this year, allowing new investments in technology to improve passenger experience.

A theme for 2020 will be the ongoing contractual negotiations with the pilots.

As for the new aircraft, Delta is still interested in the new medium-sized aircraft proposed by Boeing, known as NMA, despite the late decision of the aircraft manufacturer to launch the new aircraft, as it continues to deal with the consequences of the 737 MAX .

Delta wants to remain a customer of both Boeing and Airbus SE, but the longer it takes Boeing to decide on the launch of the NMA, the fewer options the operator has, Bastian said, noting that the Airbus A321XLR and A330 could be alternatives.

The airline is still interested in investing around 100 million euros ($ 111.34 million) in the rescue of the Italian airline Alitalia, Bastian said, and is working on antitrust immunity in South America after closing the acquisition of a 20% stake in the LATAM Airlines Group.

($ 1 = 0.8981 euros)

Tracy Rucinski’s report; Edition of Muralikumar Anantharaman and Bernadette Baum

Our Standards:The Principles trust Reuters Thomson.

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