Delta profits increase with strong demand and cheaper fuel

Delta Airlines Inc.

DAL 0.42%

He said lower fuel prices and strong demand from vacation travelers helped increase quarterly profits, raising the airline to its tenth consecutive year of earnings.

The broader industry of American airlines is also on its way to a decade of profit, a record stretch of profitability that is a surprising change from a period in which boom times for airlines were often followed by penalties.

Still, Delta and other Atlanta-based airlines face challenges that include new labor agreements that could raise costs and a potential moderation in travel demand. The International Air Transport Association has said that global travel demand has continued to increase in recent months, but that the growth rate has slowed.

Delta’s executive director,

Ed bastian

He said that commercial tensions contributed to a lower demand for corporate travel in Asia and that travel to and from the United Kingdom has been affected by uncertainty about the country’s ties with the European Union.

Still, he said he expected the demand for air travel to exceed economic growth nationwide.

“The American consumer is quite healthy,” Bastian said.

Delta said Tuesday that it expects its unit costs – the cost of flying a seat per mile, excluding fuel – could increase from 2% to 3% in the first quarter of this year, exceeding the unit’s revenue, which it expects be flat and increase 2%. The airline said unit revenue grew 2.4% in the fourth quarter of 2019 due to strong vacation trips.

Delta has also been driven by the diminished capacity of its competitors in recent months. Delta is the only one of the four largest US operators. UU. That does not operate on

Boeing Co.

737 MAX, which has been grounded worldwide since March after a couple of accidents that killed 346 people.

American Airlines Group Inc.,

United Airlines Holdings Inc.

Y

Southwest Airlines Co.

Everyone has the MAX in their fleets. The grounding connection has cost Delta’s largest national rivals hundreds of millions of dollars in lost profits and created unprecedented logistical challenges for carriers facing months of uncertainty about when the plane will be allowed to return to service.

Delta expanded its national flight capacity by 6% in the fourth quarter. Bastian has said that the situation has been a modest benefit for Delta, but not a huge source of profit. He said he does not expect the return of the MAX to be a great competitive challenge every time the plane is allowed to fly again.

“We are not too worried,” he said.

Delta could soon face higher labor costs as a result of ongoing contractual negotiations with its pilots. Delta told the union that it wants to seek federal mediation because it says the talks have stalled after nine months, according to a letter that the head of the Delta drivers union sent to members last week.

Delta reported a net profit of $ 1.1 billion in the fourth quarter, above the $ 1.02 billion of the previous year. Adjusted earnings per share increased to $ 1.70, which is 20 cents above the top end of Delta’s previous guidance and ahead of the $ 1.40 per share expected by analysts. Delta’s total revenues rose 6.5% to $ 11.4 billion in the fourth quarter.

The fourth quarter profit included an increase of 9 cents for Delta’s investment in

Gol Linhas Smart Airlines SA,

a Brazilian airline, after the Delta agreement in September to take a stake in Chile

Latam Airlines Group SA

.

Write to Alison Sider at [email protected]

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