Delta Air Lines Q1 GAAP Income Goes Swings Wildly on Special Items

Andrew Klips  |

Delta Air Lines Inc. (DAL) reported Tuesday morning that first-quarter profit dropped by 94 percent, weighted down by special items and a profit sharing expense. Aside from those costs, the world’s second largest airline, on an adjusted basis, topped the year prior quarter and analyst earnings expectations.

Revenue at Delta during the first quarter, a notoriously tough quarter for airlines, improved by 1 percent over Q1 2012 to $8.5 billion from $8.4 billion. GAAP net income fell to $7 million, or 1 cent per share, compared to $124 million, or 15 cents per share, in the year prior quarter. GAAP net income included $78 million in charges for special items (including $20 million in profit sharing expense). The year earlier quarter included net gains of $163 million in special items. Excluding those items in the latest quarter, profits would have been $85 million, or 10 cents per share.

Analysts were expecting EPS of 6 cents per share on revenue of $8.5 billion. Analysts typically don’t include special items in their estimates.

Passenger revenue increased 1.4 percent compared to last year to $104 million, while passenger unit revenue increased 4.1 percent, thanks to a 2.1 percent increase in yield. Domestic revenue for the Atlanta-based company grew 6.1 percent year-over-year to $3.4 billion.

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Revenue from cargo, a far smaller component of total sales, decreased 2.4 percent to $6 million on declining freight yields.

Load factor increased to 81.2 percent, with traffic lower by 0.6 percent on a 2.5 percent decrease in capacity.

"Our results represent Delta's strongest March quarter financial and operational performance in over a decade,” said Richard Anderson, chief executive at Delta. He added, "With a solid financial foundation and building momentum from initiatives like our LaGuardia expansion, Virgin Atlantic investment and new Terminal 4 at New York-JFK, we are well positioned to generate significant improvements in Delta's profitability going forward."

"We are taking actions to mitigate the decline in close-in demand we saw in the last part of March, and we expect the impact of the sequester, combined with a softening of leisure demand, to result in a 2 – 3 percent decline in April's unit revenues,” said Ed Bastian, Delta's president.

Shares of DAL, which were up about 18 percent in 2013 as of Monday’s close, are starting Tuesday in the red upon the news release. Shares are off by 1 percent at $14.95 just after the opening bell.

Separately, rival US Airways (LCC) reported GAAP first-quarter profit of $44 million, or 26 cents per share, down from $48 million, or 28 cents per share, in Q1 2012. Excluding special items, non-GAAP net income was $55 million, or 31 cents per share. Revenue perked by 3.5 percent to $3.38 billion. Analysts were expecting EPS of 27 cents on revenue of $3.36 billion. Shares have started the day flat at $15.50.

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