Delta's August Traffic Increases - Analyst Blog

The world’s largest airline, Delta Air Lines (DAL) reported an increase in traffic for August 2010 compared with August 2009.

 

During the month, Delta Airlines’ traffic, measured in billions of revenue passenger miles, increased 1.1% year over year to 18.94 billion. Capacity or available seat miles were up 1.2% and load factor (percentage of seats filled with passengers) was 86.5%, flat year over year. The jump in traffic was due to a growth in international routes, particularly in Japan as stronger yen boosted overseas travel in Japan.

 

The rise in August traffic has been higher than July when Delta's air traffic rose 0.5%, while its capacity dropped 0.3%. 

 

Domestic traffic fell 0.9% to 11.10 billion despite a 0.3% uptick in the number of available seats, as load factor declined 100 basis points (bps). International traffic was up 4.2% to 7.84 billion on a 2.7% growth in capacity and load factor expanded 130 basis points.

 

One of the company’s peers, Continental Airlines Inc. (CAL) reported a decrease of 0.4% in its August traffic.

 

We expect Delta to experience a considerable increase in airline traffic both domestically and internationally during the third quarter of 2010 based on improvement in the global economy, improved business travel, growing international traffic and rising fares. Moreover, Delta’s investment to improve the customer experience and the efficiency of the aircraft fleet is expected to fetch profitable returns in future.

 

We expect Delta to benefit from Northwest merger given that the synergies from it will be fully realized and strong revenue momentum will continue as the economy strengthens. However, we remain cautious on the company due to its debt-loaded balance sheet, rising fuel prices, a unionized workforce and competitive threats.

 

We have a Zacks #3 Rank (short-term Hold recommendation) on the stock. We also reiterate our long-term Neutral rating.

 

Based in Atlanta, Georgia, Delta is the largest U.S. airline and provides scheduled air transportation for passengers and cargo throughout the U.S., and around the world.