The steady increase in passenger traffic and capacity expansion will help the company maintain the momentum in the final months of the fiscal year. Ticket sales, which account for more than 90% of total revenues, will continue to be the main growth driver. It is estimated that margins benefited from higher unit revenues and a further decline in operating cost per available seat mile.
It is too early to expect Delta’s recent investment in Latam Airlines – involving the acquisition of a part of the Latin American firm’s aircraft fleet – to contribute to near-term revenue growth. The $1.9-billion deal will be accretive to earnings in the coming years. Meanwhile, the credit card partnership with American Express (AXP) is estimated to have generated incremental revenue in the December-quarter.
Of late, Delta has been shifting focus to non-core areas of the business through strategic partnerships, such as the recent acquisition of a minority stake in Wheels Up, an aviation startup that operates private jets. The deal also marked the airline’s exit from the luxury jet charter business.
In the third quarter, earnings grew sharply to $2.32 per share and topped expectations even as revenue moved up 5% annually to $12.6 billion, in line with the consensus estimate.
After gaining about 19% in the past twelve months, shares of Delta Air Lines dropped in the early days of the year mainly due to economic and geopolitical uncertainties. Nevertheless, the shares are still trading close to the all-time highs seen last year.