Delta Faces New International Challenge--Update
April 12 2018 - 7:30AM
Dow Jones News
By Doug Cameron
Delta Air Lines Inc. said international travel boosted profits
in the latest quarter as the industry faces a potential shakeout of
the Trans-Atlantic market following a rival's interest in buying a
fast-growing low-cost carrier.
Buoyant demand from business travelers and a weaker U.S. dollar
have boosted international sales for airlines including Delta, the
largest U.S. operator on flights to and from Europe.
Delta has been exporting its own low-fare model from domestic
flights onto international services, in part because of competition
from Norwegian Air Shuttle A/S, a pioneer of cheap, longhaul
flights.
International Consolidated Airlines Group SA, parent of British
Airways and Iberia, said Thursday that it had built a minority
stake in Norwegian Air Shuttle ASA , one of the largest customers
of Boeing Co. 787 jets. IAG, as the company is known, counts
American Airlines Group Inc. among its partners through a
longstanding joint venture to share sales and profits.
Delta is partnered with Air France-KLM SA and Virgin Atlantic
Airways Ltd. in Europe, anchored by minority stakes of its own. A
takeover of Norwegian could threaten Delta's position in the
Trans-Atlantic market, even as the airline reported
forecast-beating quarterly earnings and record revenue.
Delta's Trans-Atlantic revenue rose 15% in the quarter to March
31 from a year earlier, outpacing growth in domestic and other
overseas markets.
Shares in Delta, the No. 2 U.S. airline by traffic, and its
rivals have in recent months been hit by investor concerns that
excess capacity could hit earnings. The shares were up 1% in
pre-open trade.
Delta said its closely watched average revenue was expected to
rise by 3% to 5% in the June quarter after climbing 5% in the three
months to March 31.
Investors monitor the rise in total revenue per available seat
mile as a sign of how well the industry is absorbing extra flying
capacity, which tends to put downward pressure on fares.
The industry is still reeling from the January announcement by
United Continental Holdings Inc. that it plans to grow capacity by
as much as 6% a year, a faster clip than Delta or larger rival
American.
Delta and other carriers have said they won't boost their own
flying plans to keep market share, but investors remain concerned
that lower fares and higher labor costs will hit profits.
Atlanta-based Delta reported profits of $547 million in the
March quarter compared with $561 million a year earlier. Per-share
earnings rose a penny to 78 cents, with the adjusted total of 74
cents beating Wall Street estimates. Revenue rose 10% to $9.97
billion, a record for the quarter.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
April 12, 2018 08:15 ET (12:15 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
International Consolidat... (LSE:IAG)
Historical Stock Chart
From Apr 2024 to May 2024
International Consolidat... (LSE:IAG)
Historical Stock Chart
From May 2023 to May 2024