Despite Lower Earnings, Delta Airline (NYSE:DAL) Still on the Rise

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By Chris Hillman on July 24, 2014 Company

Delta Air Lines Inc. (NYSE:DAL) posted lower than expected financial reports for the month of June, 2 weeks ago. The company’s management, on July 23, 2014, said that Delta Air Line Inc. (NYSE:DAL) has strong international operations. Richard Anderson, the chief executive officer of the company said that a plus point that the company enjoys is that it can control its trans-Atlantic destiny since its joint venture alone makes up to 93 percent of the capacity. The joint venture of the company includes Alitalia and Air France. Moreover, Ed Bastian, the president of the company, said that Delta Air Line Inc. (NYSE:DAL) deals with 30 percent of the industry capacity and raises around $13 billion in revenues.

Delta’s rivals, United Airlines (NYSE:UAL) and American Airlines (NASDAQ:AAL) will post their financial reports for the second quarter today. Rumors have it that the international demands of both the companies remained high.

Delta Air Line Inc’s (NYSE:DAL) president and CEO said that the company’s returns on trans-Atlantic were strong for the second quarter of the year 2014, and the company will continue to post good returns in the coming quarters as well. The management further said that although the joint venture has different color airplanes but it has been running as one airline. Ed Bastian and Richard Anderson said that the capacity growth of the joint venture will remain between 1 percent and 3 percent for the upcoming quarter.

The management disclosed that one of the reasons why the returns on trans-Atlantic were so good was that Virgin Atlantic provided access to London Heathrow. Keep in mind that the company enjoys 49 percent of ownership in the Virgin Atlantic.

During the last quarter, the company’s revenue per seat mile increased by 5.7 percent, whereas the domestic PRASM rose by 10.2 percent. Pacific and Latin America PRASM dropped by 3.2 percent and 0.7 percent respectively while trans-Atlantic PRASM increased by 7.2 percent. The management said that the company has suffered a loss in Tokyo due to the devaluation of yen. However, the company is planning on taking certain measures to improve the situation there and to meet the increased demand. The company has reduced its beach destination traffic as well as the Intra-Asia traffic in order to cater to the demands of other destinations as well.

The company has reported a net income of $889 million for the second quarter, bringing the EPS to $1.04 and beating the Thomson’s estimates of $1.03. The company’s revenues increased by 9 percent and reached the figures of $10.6 billion. The adjusted earnings were 94 cents with an operating margin of 14.9 percent.

The company is currently facing the lowest net debt of $7.9 billion in its 20 years history. Delta Air Line Inc. (NYSE:DAL), on the last trading day, July 23, 2014, opened its stocks at a price of $37.78 and closed at an increased price of $39.15. The intraday range for the company was $37.76 to $39.30. The company has a market capitalization of 33.2 billion with a price to earnings ratio of 3.13.