Published On: Wed, Apr 10th, 2019

Delta lifts 2019 revenue forecast after quarterly beat

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FILE PHOTO:  A Delta plane passes a Delta bus on the tarmac at LAX airport in Los Angeles
FILE PHOTO: A Delta plane passes a Delta bus on the tarmac at LAX airport in Los Angeles, California U.S. January 10, 2018. REUTERS/Lucy Nicholson/File Photo

April 10, 2019

By Tracy Rucinski and Rachit Vats

(Reuters) – Delta Air Lines Inc on Wednesday lifted its 2019 revenue forecast after reporting better-than-expected quarterly profits, boosted by robust travel demand and a renewed agreement with credit-card issuer American Express.

The No. 2 U.S. carrier expects full-year revenue growth of 5 to 7 percent, an increase from 4 to 6 percent previously, said President Glen Hauenstein in a statement.

“Demand for Delta’s product has never been stronger,” Hauenstein said.

Total operating revenues grew 5.1 percent to $10.47 billion in the first quarter to March 31, as growth in premium ticket sales and the airline’s maintenance business helped offset lower cargo volumes.

The results relieved investor concerns about the impact of a U.S. government shutdown in January and severe weather on first-quarter results. Shares rose 2 percent to $58.13.

Atlanta-based Delta does not own the Boeing 737 MAX, which was grounded worldwide in March following two fatal crashes.

As a result, its shares have outperformed those of rivals American Airlines Group Inc and Southwest Airlines Co, who own the biggest fleets of the grounded jets in the United States.

American trimmed its first-quarter revenue forecast on Tuesday after cancelling 1,200 flights due to the MAX grounding, and Southwest has already cut its financial outlook for the year.

Delta did not update its own 2019 profit guidance but said it expects second-quarter profit in the range of $2.05 per share to $2.35 per share. At the midpoint of the range, the forecast was above average analyst estimates of $2.13 per share, according to IBES data from Refinitiv.

Delta forecast total unit revenue, a closely watched measurement of revenues per available seat mile, to increase 1.5 percent to 3.5 percent in the second quarter.

“While providing limited read-through to other names, we are hard-pressed to find fault with the quality of Delta’s (forecast),” JPMorgan analyst Jamie Baker said in a note.

Net income rose to $730 million in the first quarter ended March 31 from $557 million a year earlier. On an adjusted basis, Delta earned 96 cents per share, beating expectations of 90 cents per share.

Analysts say Delta’s renewed deal with American Express Co earlier this month was likely to add about $400 million to its 2019 revenue.

(Reporting by Tracy Rucinski in Chicago and Ankit Ajmera and Rachit Vats in Bengaluru; Editing by Arun Koyyurm and Nick Zieminski)

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