Delta Expects To Grow Capacity 1%-3% In 2011, Dahlman Rose Reports

Delta Air Lines Inc. DAL expects to grow capacity in 2011 by 1% - 3%, retiring less efficient 50-seat aircraft as they come off lease and focusing on maximizing revenue potential from larger aircraft, Dahlman Rose reports. “Capacity growth is coming from adding international routes in restricted markets,” Dahlman Rose writes. “Delta will add two new routes to Tokyo (Haneda) and four routes to London (Heathrow).” Dahlman Rose said that during the investor day, management spoke to the revenue opportunities in 2011 and expects Cargo and Ancillary revenue growth of 5% - 10%. Passenger unit revenues should improve by at least 3% - 4%, which annualizes current year trends. “Delta will continue to deleverage the balance sheet in 2011 & 2012. Management estimates 2011 FCF of $1.8 billion and CAPEX of $1.5 billion, while they pay down $1.8 billion of debt,” Dahlman Rose concludes. “Delta plans to have net debt down to $10.2 billion by the year end 2012. The debt reduction implies net interest expense in 2011 and 2012 of $1 billion and $900 million respectively.” Delta Air Lines currently trades at $12.78.