General Lee
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Dec. 14, 2011, 3:11 p.m. EST
Delta Air sees ‘solid’ profit growth for 2012
Business travel is expected to climb next year as economy grows
B MarketWatch --By Christopher Hinton
WASHINGTON (MarketWatch) — Delta Air Lines said Wednesday it expects “solid” profit growth next year on the back of strong business-travel demand and cost cutting.
For 2012, the Atlanta-based carrier said it would trim between 2% and 3% from its system-wide seat capacity to help boost its ticket prices. For trans-Atlantic flights, which include some of the industry’s highest-yielding routes, Delta and its joint venture partners want to pull their combined capacity down by 7% to 8% in anticipation of a European recession.
Globally, however, Delta expects the economy to grow slowly, spurring more deep-pocketed business people to travel. Corporate travel is expected to rise 6% to 8% next year from 2011 levels, the airline said in a government filing.
In the last four weeks, health care, financial services and transportation sector related travel are up sharply from the same period last year.
Earnings in 2011 are projected to be $800 million, or $1.1 billion after adjusting for restructuring and loss on extinguishment of debt, Delta said. Analysts surveyed by FactSet Research were looking for full-year adjusted earnings of $977 million, on average.
Delta posted an adjusted profit of $1.44 billion last year. Shares of Delta have had a rough year with fuel prices up sharply and concerns a sovereign-debt crisis in Europe could drag down the global economy and reduce the demand for flying. In the past year the carrier’s stock is off by nearly 38%, and it’s down about 3% in the last three months.
On Wednesday, Delta shares rose more than 2% to an intraday high of $8.35. More recently the stock was up 2% to $8.15.
To offset a roughly 40% jump in its fuel bill, Delta said it intends to lower its non-fuel costs to 2010 levels, but a climbing labor expense and higher airport fees have frustrated the attempt. Non-fuel costs per available seat mile next year is expected to rise by 2% to 4%, or about 40 cents higher than the targeted level.
Delta will focus on structural changes to help bring costs down, including the delivery on new, more fuel efficient Boeing Co. 737-900ER jets at the end of 2012 that will lower maintenance costs. There are also opportunities to increase employee productivity and eliminate more smaller-gauge aircraft, especially 50-seat regional jets.
Combined, these structural changes could lower the airline’s costs by $600 million to $750 million. The airline is also focused on reducing its debt, and projects its adjusted net debt at the end of 2011 will be $12.9 billion, down from $17 billion at the end of 2009. By the end of 2013, Delta wants to get its debt down to about $10 billion.
Bye Bye---General Lee
Delta Air sees ‘solid’ profit growth for 2012
Business travel is expected to climb next year as economy grows
B MarketWatch --By Christopher Hinton
WASHINGTON (MarketWatch) — Delta Air Lines said Wednesday it expects “solid” profit growth next year on the back of strong business-travel demand and cost cutting.
For 2012, the Atlanta-based carrier said it would trim between 2% and 3% from its system-wide seat capacity to help boost its ticket prices. For trans-Atlantic flights, which include some of the industry’s highest-yielding routes, Delta and its joint venture partners want to pull their combined capacity down by 7% to 8% in anticipation of a European recession.
Globally, however, Delta expects the economy to grow slowly, spurring more deep-pocketed business people to travel. Corporate travel is expected to rise 6% to 8% next year from 2011 levels, the airline said in a government filing.
In the last four weeks, health care, financial services and transportation sector related travel are up sharply from the same period last year.
Earnings in 2011 are projected to be $800 million, or $1.1 billion after adjusting for restructuring and loss on extinguishment of debt, Delta said. Analysts surveyed by FactSet Research were looking for full-year adjusted earnings of $977 million, on average.
Delta posted an adjusted profit of $1.44 billion last year. Shares of Delta have had a rough year with fuel prices up sharply and concerns a sovereign-debt crisis in Europe could drag down the global economy and reduce the demand for flying. In the past year the carrier’s stock is off by nearly 38%, and it’s down about 3% in the last three months.
On Wednesday, Delta shares rose more than 2% to an intraday high of $8.35. More recently the stock was up 2% to $8.15.
To offset a roughly 40% jump in its fuel bill, Delta said it intends to lower its non-fuel costs to 2010 levels, but a climbing labor expense and higher airport fees have frustrated the attempt. Non-fuel costs per available seat mile next year is expected to rise by 2% to 4%, or about 40 cents higher than the targeted level.
Delta will focus on structural changes to help bring costs down, including the delivery on new, more fuel efficient Boeing Co. 737-900ER jets at the end of 2012 that will lower maintenance costs. There are also opportunities to increase employee productivity and eliminate more smaller-gauge aircraft, especially 50-seat regional jets.
Combined, these structural changes could lower the airline’s costs by $600 million to $750 million. The airline is also focused on reducing its debt, and projects its adjusted net debt at the end of 2011 will be $12.9 billion, down from $17 billion at the end of 2009. By the end of 2013, Delta wants to get its debt down to about $10 billion.
Bye Bye---General Lee
