Delta Air Lines, Inc. (NYSE:DAL) reported its operational traffic release for the month of January yesterday. On a positive note, the airline reported a 3.7% growth in traffic and capacity unit measures on a year-over-year (YoY) basis.
Consolidated Revenue Passenger Miles (RPM) were recorded at 15.57 billion, higher against RPM of 15.01 billion over same month last year. While Available Seat Miles (ASM) of 19.15 billion signify a 1.1% growth YoY.
Out of the reported consolidated RPM, the airline generated 9.29 billion from its domestic operations with a 6.4% growth YoY, and 6.27 billion from international operations without any YoY growth. The airline however was expecting growth, given the introduction of various international flights last year.
Similarly, of a consolidated ASM of 19.15 billion, the airline generated 11.46 billion from domestic operations with a 3.7% YoY growth, 7.68 billion were generated from international operations with a 2.6% YoY decline. The decline in international ASM further dragged down the consolidated ASM. Despite reporting growth in unit revenues, Delta Air Lines’ Passenger Revenues per Available Seat Miles (PRASM) declined 3% YoY. It succumbed to pressure from foreign exchange, which chipped away its consolidated passenger unit revenue.
Delta reported consolidated Load Factor of 81.3%, 2.1 points higher over the same month last year. The Mainline Completion Factor was also reported at 98.7%, indicating absolutely no growth. The airline is struggling to sustain growth in its monthly unit revenues, for which it resorted to the launch of various new flight operations.
The planning eventually paid off when Delta Air Lines reported higher traffic results at the end of fiscal year 2015, reporting numbers better than United Airlines. It went up a grade, as the number two US airline, which clearly shows that passengers preferred Delta over United last year.
While addressing investors at a conference, Delta announced plans to sustain its industry leadership during 2016. It expects to do so by capitalizing on the reduction in fuel expense and low operational costs. It also plans to expand international flight operations to report growth in international unit revenues.
Given the current oil price trend, the airline is likely to save up to $3 billion over the next 12 months, resulting in a reduction in aircraft fuel expense by 35%. As crude continues to remain volatile, the airline may also reduce fuel hedge time duration, through which it can reduce losses from fuel hedge by $500 million in 2016.