Delta Air Lines Announces September Quarter Profit

ATLANTA, Oct. 13, 2016 /PRNewswire/ -- Delta Air Lines (NYSE: DAL) today reported financial results for the September 2016 quarter.  Highlights of Delta's September 2016 quarter results, including both GAAP and adjusted metrics, are below and incorporated here. 

Adjusted pre-tax income for the September 2016 quarter was $1.9 billion, a $278 million decrease from the September 2015 quarter.  The technology outage and subsequent operational recovery Delta experienced over four days in early August reduced pre-tax income for the quarter by an estimated $150 million.

"Delta's resiliency stood out this quarter as we worked through the outage, continued revenue headwinds, and volatile fuel prices to produce the industry's best operational reliability and service for our customers along with solid margins, cash flows and returns for our owners," said Ed Bastian, Delta's chief executive officer.  "With our focus on building a more sustainable and durable business, we will be taking a cautious approach to 2017 by keeping our capacity in line with the December quarter's 1 percent growth level."

Revenue Environment

Delta's operating revenue for the September quarter decreased 5.6 percent, or $624 million, of which $100 million was due to the outage and $70 million was from prior year Yen hedge gains.  Passenger unit revenues declined 6.8 percent, including nearly 2 points of impact from the outage and Yen hedges, on a 1.5 percent increase in capacity. 

"While we were encouraged by our unit revenue trends through the September quarter, we have more work ahead of us to achieve our goal of positive unit revenues," said Glen Hauenstein, Delta's president.  "With further slowing of our capacity growth in the December quarter and additional traction on our revenue management initiatives, we should make progress against that goal and we expect our December quarter unit revenues to decline by 3 – 5 percent year over year."

December 2016 Quarter Guidance

For the December quarter, Delta is expecting a slight decline in margins year over year, as savings from lower fuel prices and productivity initiatives will be fully offset by declines in unit revenues that the company continues to address through its capacity actions and revenue management initiatives.  The projections for the December quarter do not include any estimates for the company's potential agreement with its pilots.

*See note A for information about reconciliation of these projected non-GAAP financial measures

Cost Performance

Adjusted fuel expense² declined $348 million compared to the same period in 2015, on 10 percent lower market fuel prices.  Delta's adjusted fuel price per gallon for the September quarter was $1.48, which includes $0.04 per gallon from losses at the Trainer Refinery.

CASM-Ex³ including profit sharing, increased 0.1 percent for the September 2016 quarter compared to the prior year period driven by strong operational performance and productivity savings realized during the quarter, in addition to lower profit sharing expense.  

The reduction in non-operating expense included $26 million of lower interest expense from Delta's debt reduction initiatives.

"By leveraging our productivity and operational reliability, we overcame the cost headwinds from the outage to meet our guidance and then used our balanced approach with our cash flows to invest in the business, pay down debt and return cash to our owners," said Paul Jacobson, Delta's chief financial officer.  "Looking ahead, our continued cost discipline and focus on free cash flow have positioned us well to successfully weather the inevitable challenges we face in delivering sustainable results for the long-term."

Cash Flow, Shareholder Returns, and Adjusted Net Debt 

Delta generated $1.8 billion of adjusted operating cash flow and $1.1 billion of free cash flow during the quarter.  The company used this strong cash generation to invest $680 million into the business for aircraft purchases and improvements, for facilities upgrades and to support its maintenance part-out initiatives.

For the September quarter, the company returned $650 million to shareholders, comprised of $150 million of dividends and $500 million of share repurchases.  Through the end of the September quarter, Delta has returned $2.7 billion to its owners in 2016 through dividends and share repurchases.

Adjusted net debt⁴ at the end of the quarter stood at $6.4 billion. 

September Quarter Results

About Delta
Delta Air Lines serves nearly 180 million customers each year. In 2016, Delta was named to Fortune's top 50 Most Admired Companies in addition to being named the most admired airline for the fifth time in six years. Additionally, Delta has ranked No.1 in the Business Travel News Annual Airline survey for an unprecedented five consecutive years. With an industry-leading global network, Delta and the Delta Connection carriers offer service to 319 destinations in 57 countries on six continents. Headquartered in Atlanta, Delta employs more than 80,000 employees worldwide and operates a mainline fleet of more than 800 aircraft. The airline is a founding member of the SkyTeam global alliance and participates in the industry's leading transatlantic joint venture with Air France-KLM and Alitalia as well as a joint venture with Virgin Atlantic. Including its worldwide alliance partners, Delta offers customers more than 15,000 daily flights, with key hubs and markets including Amsterdam, Atlanta, Boston, Detroit, Los Angeles, Minneapolis/St. Paul, New York-JFK and LaGuardia, London-Heathrow, Paris-Charles de Gaulle, Salt Lake City, Seattle and Tokyo-Narita. Delta has invested billions of dollars in airport facilities, global products and services, and technology to enhance the customer experience in the air and on the ground. Additional information is available on the Delta News Hub, as well as delta.com, Twitter @DeltaNewsHub, Google.com/+Delta, and Facebook.com/delta.

End Notes

Forward Looking Statements Statements in this investor update that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements.  These risks and uncertainties include, but are not limited to, the effects of terrorist attacks or geopolitical conflict; the cost of aircraft fuel; the impact of rebalancing our hedge portfolio, recording mark-to-market adjustments or posting collateral in connection with our fuel hedge contracts; the availability of aircraft fuel; the possible effects of accidents involving our aircraft; the restrictions that financial covenants in our financing agreements will have on our financial and business operations; labor issues; interruptions or disruptions in service at one of our hub or gateway airports; disruptions or security breaches of our information technology infrastructure; our dependence on technology in our operations; the effects of weather, natural disasters and seasonality on our business; the effects of an extended disruption in services provided by third party regional carriers; failure or inability of insurance to cover a significant liability at Monroe's Trainer refinery; the impact of environmental regulation on the Trainer refinery, including costs related to renewable fuel standard regulations; our ability to retain management and key employees; competitive conditions in the airline industry; the effects of extensive government regulation on our business; the sensitivity of the airline industry to prolonged periods of stagnant or weak economic conditions including the effects of Brexit; and the effects of the rapid spread of contagious illnesses. 

Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2015 and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016.  Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of Oct. 13, 2016, and which we have no current intention to update.