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AMERICAN AIRLINES GROUP INC.

(AAL)
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Delta Air Lines quarterly profit rises, aided by U.S. demand

07/23/2014 | 12:56pm EDT
Customers wait their turn to be served at at the Delta airlines office in Caracas

(Reuters) - Delta Air Lines (>> Delta Air Lines, Inc.) reported a higher-than-expected second-quarter profit as it flew fuller planes and enjoyed higher passenger revenue in the United States, boosting its shares by 3 percent.

(Reuters) - Delta Air Lines (>> Delta Air Lines, Inc.) reported a higher-than-expected second-quarter profit as it flew fuller planes and enjoyed higher passenger revenue in the United States, boosting its shares by 3 percent.

Atlanta-based Delta has bolstered revenue by charging more for seats with greater legroom, replacing 50-seat regional jets with larger, more cost-efficient planes.

The airline also said its Pennsylvania refinery, which it bought in 2012 to help reduce fuel expenses, turned a profit in the second quarter.

Solid financial performance has positioned Delta to be able to pay down debt, raise its dividend and buy back stock as it builds on a strategy to enhance returns for shareholders.

"Delta seems to be hitting on all cylinders internationally and domestically with well-controlled costs and finally getting benefit from its refinery," said Jim Corridore, an analyst with S&P Capital IQ.

"In every aspect of the way it is operating - cash flow generation, debt repayments, stock buybacks - it seems to be doing everything right," he added.

The airline said it expected unit revenue - a benchmark industry gauge known as passenger revenue per available seat mile - to grow 2 percent to 4 percent in the current quarter. That metric surged 5.7 percent in the just-completed quarter.

Delta forecast operating margin, a measure of profitability, of 15 percent to 17 percent for the current quarter; that compares with 15.1 percent for the second quarter.

"As we look into the fall, we see good forward bookings and all signs point to a continued solid demand environment," Delta President Edward Bastian said during a conference call.

Delta's second-quarter net income totaled $801 million, or 94 cents a share, compared with $685 million, or 80 cents a share, a year earlier.

Adjusted for restructuring and other items, profit was $1.04 a share in the latest period, compared with the $1.03 expected by analysts on average, according to Thomson Reuters I/B/E/S.

Revenue rose 9 percent in the quarter to $10.62 billion, compared with analysts' forecast of $10.65 billion. Passenger revenue rose 15.7 percent in the United States and 5.5 percent in Europe, and Delta cited a strong performance at its Atlanta and New York hubs. Yields weakened, however, in Asia and Latin America.

Delta also said oversupply was a challenge in Europe, but added that joint ventures such as the one it has with Britain's Virgin Atlantic Airways [VA.UL] was helping it draw more corporate customers. Demand in Latin America was picking up after weakness tied to World Cup soccer matches, it said.

Shares of Delta jumped 3.1 percent to $38.86 as other major U.S. airlines gained. Delta's stock is up 41 percent so far this year, compared with a 70 percent rise for American Airlines Group (>> American Airlines Group Inc) and a 21 percent rise for United Airlines (>> United Continental Holdings Inc).

(Reporting by Karen Jacobs in Atlanta; editing by G Crosse, Franklin Paul and Bernadette Baum)


ę Reuters 2014
Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN AIRLINES GROUP INC. 4.15% 22.08 Delayed Quote.40.01%
CONTINENTAL HOLDINGS CORPORATION -0.63% 23.5 End-of-day quote.13.53%
DELTA AIR LINES, INC. 3.12% 41.67 Delayed Quote.3.63%
LETS HOLDINGS GROUP CO., LTD. -1.35% 6.57 End-of-day quote.-15.55%
RISE, INC. 0.00% 26 End-of-day quote.8.33%
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Financials (USD)
Sales 2021 30 676 M - -
Net income 2021 -1 965 M - -
Net Debt 2021 30 734 M - -
P/E ratio 2021 -6,11x
Yield 2021 -
Capitalization 14 296 M 14 296 M -
EV / Sales 2021 1,47x
EV / Sales 2022 1,06x
Nbr of Employees 117 400
Free-Float 98,1%
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Number of Analysts 23
Last Close Price 22,08 $
Average target price 19,53 $
Spread / Average Target -11,6%
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Managers and Directors
William Douglas Parker Chairman & Chief Executive Officer
Robert D. Isom President
Derek J. Kerr Chief Financial & Accounting Officer, Executive VP
Maya Leibman Chief Information Officer & Executive VP
Kevin Brickner Senior Vice President-Technical Operations