jumbojet
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Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 11:30 am

Adjusted pre-tax income for the September quarter 2018 was $1.6 billion, and adjusted earnings per share were $1.80, at the high end of guidance. Adjusted earnings per share were up 16 percent compared to the prior year quarter, driven by revenue momentum, tax reform benefits and a four percent lower share count. Results reflect a $30 million negative impact from Hurricane Florence.

“Our solid eight percent revenue growth, combined with flat non-fuel unit cost performance, helped offset 85 percent of the $655 million fuel cost increase in the quarter.

$395 million toward 2018 profit sharing,

Delta generated $1.5 billion of operating cash flow and $655 million of free cash flow during the quarter, after the investment of $865 million primarily for aircraft purchases and modifications.
For the September quarter, Delta returned $566 million to shareholders, comprised of $325 million of share repurchases and $241 million in dividends.

Delta’s adjusted operating revenue of $11.8 billion for the September quarter improved eight percent, or $912 million versus the prior year. This quarterly revenue result marks a record for the company, driven by improvements across Delta’s business, including a nearly 20 percent increase in premium product ticket revenues and double-digit percentage increases in cargo, loyalty and Maintenance, Repair and Overhaul revenue.
Total unit revenues excluding refinery sales (TRASM) increased 4.3 percent during the period driven by strong demand and improving yields. Foreign exchange benefit of approximately half a point was offset by the impact of Hurricane Florence.

https://news.delta.com/delta-air-lines- ... ter-profit
 
JammyBritton27
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 11:43 am

Nice quarter. Looks like passengers don't mind paying more for premium tickets (a 20% increase in premium product ticket revenue for DA). Let's see how other airlines report. https://news.alphastreet.com/us-airline ... to-expect/
 
jumbojet
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 11:45 am

To summarize 3Q18 results GAAP

Pre-tax income 1.6 billion (3Q17 1.8 billion)
Net Income 1.3 billion (3Q17 1.1 billion)
diluted earnings per share 1.91 (3Q17 1.61)
operating revenue 11.95 billion (3Q17 11 billion)
operating expenses 10.3 billion (3Q17 9.2 billion)
fuel expense 2.5 billion (3Q17 1.8 billion)
average fuel price per gallon 2.21 (3Q17 1.61 gallon)
Consolidated Unit Cost (CASM-CASM-ex) 14.15 (3Q17 13.17)
Total unit revenues (TRASM, TRASM, adjusted) 16.40 (3Q17 15.77)

profit sharing contribution: 395 million (3Q17 314 million)
 
tphuang
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 12:11 pm

Pretty nice quarter. Looks like 13.7% pre-tax margin and 11% net margin.

If I read this correctly.
Domestic yield up a little bit
TATL yield up a lot
TPAC yield up moderately
latin America down a bit

If this holds across the board, my guess is AA and B6 are not going to have good numbers this quarter. UA will probably do well.

Looks like Delta's JVs are working pretty well.
 
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Revelation
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 12:22 pm

JammyBritton27 wrote:
Nice quarter. Looks like passengers don't mind paying more for premium tickets (a 20% increase in premium product ticket revenue for DA). Let's see how other airlines report. https://news.alphastreet.com/us-airline ... to-expect/

The 'basic economy' strategy is working -- you make the baseline product so bad that anyone with the means will pay extra to avoid it.
Wake up to find out that you are the eyes of the world
The heart has it's beaches, it's homeland and thoughts of it's own
Wake now, discover that you are the song that the morning brings
The heart has it's seasons, it's evenings and songs of it's own
 
FlyHossD
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 12:26 pm

Nicely done DL, congratulations. I'll be very interested to the Q2 results from the other carriers.
My statements do not represent my former employer or my current employer and are my opinions only.
 
JammyBritton27
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 1:08 pm

Revelation wrote:
The 'basic economy' strategy is working -- you make the baseline product so bad that anyone with the means will pay extra to avoid it.

NO, I didn't intend that way. Given the pricing competition, most airlines are stripping down their prices,, adding a basic pricing tier, yet Delta sees a double-digit growth from its premium tickets.
 
JammyBritton27
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 1:11 pm

FlyHossD wrote:
Nicely done DL, congratulations. I'll be very interested to the Q2 results from the other carriers.

This is Sept. quarter for airlines i.e. Q3,, not Q2.
 
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Revelation
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 1:15 pm

JammyBritton27 wrote:
Revelation wrote:
The 'basic economy' strategy is working -- you make the baseline product so bad that anyone with the means will pay extra to avoid it.

NO, I didn't intend that way. Given the pricing competition, most airlines are stripping down their prices,, adding a basic pricing tier, yet Delta sees a double-digit growth from its premium tickets.

Well, it worked that way with me. I just looked at all my options and what was on order and given generally low TATL prices I splurged and got premium economy BOS-LHR with DL outbound and VS inbound. If the pure economy product was decent and fares were higher I probably would have gone for plain old economy like I used to. It wouldn't surprise me if more than a few others are making similar choices, thus the bump in the premium tiers.
Wake up to find out that you are the eyes of the world
The heart has it's beaches, it's homeland and thoughts of it's own
Wake now, discover that you are the song that the morning brings
The heart has it's seasons, it's evenings and songs of it's own
 
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TVNWZ
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 1:26 pm

Revelation wrote:
JammyBritton27 wrote:
Revelation wrote:
The 'basic economy' strategy is working -- you make the baseline product so bad that anyone with the means will pay extra to avoid it.

NO, I didn't intend that way. Given the pricing competition, most airlines are stripping down their prices,, adding a basic pricing tier, yet Delta sees a double-digit growth from its premium tickets.

Well, it worked that way with me. I just looked at all my options and what was on order and given generally low TATL prices I splurged and got premium economy BOS-LHR with DL outbound and VS inbound. If the pure economy product was decent and fares were higher I probably would have gone for plain old economy like I used to. It wouldn't surprise me if more than a few others are making similar choices, thus the bump in the premium tiers.


This. Prices drop a little , or not at all, but what used to be included now is higher if you want it. That was the strategy all along. It’s not to make it more affordable, but to basically increase prices by moving the pea under the shells around so you don’t notice.
 
slider
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 1:45 pm

jumbojet wrote:
To summarize 3Q18 results GAAP

operating revenue 11.95 billion (3Q17 11 billion)
operating expenses 10.3 billion (3Q17 9.2 billion)
fuel expense 2.5 billion (3Q17 1.8 billion)
average fuel price per gallon 2.21 (3Q17 1.61 gallon)
Consolidated Unit Cost (CASM-CASM-ex) 14.15 (3Q17 13.17)


Some interesting metrics here. Man, fuel YOY has made a big dent. But CASM growth outpacing RASM, but it's also September. Airlines are making money in September. Say it with me. Wow.
 
slcdeltarumd11
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 10:43 pm

Delta has it figured out. Even if fuel soars again, i see them being the next Southwest. The way southwest was continuing to make money when everyone else was filing for bankruptcy and struggling. The airline that will continue to thrive.
 
MIflyer12
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 11:43 pm

slcdeltarumd11 wrote:
Delta has it figured out. Even if fuel soars again, i see them being the next Southwest. The way southwest was continuing to make money when everyone else was filing for bankruptcy and struggling. The airline that will continue to thrive.


Southwest had fuel hedges. Delta doesn't. Jet A has been rising for a while - fairly continuously since Oct. '17. Fare & fee increases didn't cover the increased cost of fuel, let alone fuel+salaries. Delta reported higher after-tax earnings strictly due to a lower corporate tax rate. That won't save them next year.
 
winginit
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Thu Oct 11, 2018 11:46 pm

MIflyer12 wrote:
slcdeltarumd11 wrote:
Delta has it figured out. Even if fuel soars again, i see them being the next Southwest. The way southwest was continuing to make money when everyone else was filing for bankruptcy and struggling. The airline that will continue to thrive.


Southwest had fuel hedges. Delta doesn't. Jet A has been rising for a while - fairly continuously since Oct. '17. Fare & fee increases didn't cover the increased cost of fuel, let alone fuel+salaries. Delta reported higher after-tax earnings strictly due to a lower corporate tax rate. That won't save them next year.


What's your claim? That Delta won't be profitable in 3Q2019? That profits won't increase YoY in 3Q2019? You've said a lot there without actually saying anything.
 
jagraham
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 12:20 am

JammyBritton27 wrote:
Revelation wrote:
The 'basic economy' strategy is working -- you make the baseline product so bad that anyone with the means will pay extra to avoid it.

NO, I didn't intend that way. Given the pricing competition, most airlines are stripping down their prices,, adding a basic pricing tier, yet Delta sees a double-digit growth from its premium tickets.


Delta has been upsizing. Bigger planes, more premium seats. Except that 763nonER flying is almost completely gone and the premium seat ratio in the single aisle planes is less.

So the big question is - is the increased premium seat sales international or domestic?
 
deltal1011man
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 12:44 am

MIflyer12 wrote:
slcdeltarumd11 wrote:
Delta has it figured out. Even if fuel soars again, i see them being the next Southwest. The way southwest was continuing to make money when everyone else was filing for bankruptcy and struggling. The airline that will continue to thrive.


Southwest had fuel hedges. Delta doesn't. Jet A has been rising for a while - fairly continuously since Oct. '17. Fare & fee increases didn't cover the increased cost of fuel, let alone fuel+salaries. Delta reported higher after-tax earnings strictly due to a lower corporate tax rate. That won't save them next year.

Might want to listen to the earnings call.

85% of the fuel rise has been covered already and they are expecting to be back to margin growth next year.
 
tphuang
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 1:18 am

deltal1011man wrote:
MIflyer12 wrote:
slcdeltarumd11 wrote:
Delta has it figured out. Even if fuel soars again, i see them being the next Southwest. The way southwest was continuing to make money when everyone else was filing for bankruptcy and struggling. The airline that will continue to thrive.


Southwest had fuel hedges. Delta doesn't. Jet A has been rising for a while - fairly continuously since Oct. '17. Fare & fee increases didn't cover the increased cost of fuel, let alone fuel+salaries. Delta reported higher after-tax earnings strictly due to a lower corporate tax rate. That won't save them next year.

Might want to listen to the earnings call.

85% of the fuel rise has been covered already and they are expecting to be back to margin growth next year.


Have you seen the market the last couple of days? We are heading for a down cycle in the economy and the airline industry. No airline will be able escape this.

Every company expects to grow in margins next year =) That's what they say in earnings call to assure the investors.

jagraham wrote:

Delta has been upsizing. Bigger planes, more premium seats. Except that 763nonER flying is almost completely gone and the premium seat ratio in the single aisle planes is less.

So the big question is - is the increased premium seat sales international or domestic?


If you look at their yield breakdown. This quarter just like the last was really good for TATL traffic and pretty good for TPAC. DL being the largest TATL carrier in US, benefits a lot more from this. Their domestic yield growth looks good, but nothing out of ordinary.
 
PlanesNTrains
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 2:13 am

We've been fortunate for longer than I thought with the economy. There will always be corrections and we appear overdue. I agree - what they say openly to investors is probably a bit rosier than what they are internally seeing on the horizon.
-Dave


”Yet somewhere in Iceland a great anger stirred in the soul of a troubled individual...” - Revelation
 
deltal1011man
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 2:21 am

tphuang wrote:
deltal1011man wrote:
MIflyer12 wrote:

Southwest had fuel hedges. Delta doesn't. Jet A has been rising for a while - fairly continuously since Oct. '17. Fare & fee increases didn't cover the increased cost of fuel, let alone fuel+salaries. Delta reported higher after-tax earnings strictly due to a lower corporate tax rate. That won't save them next year.

Might want to listen to the earnings call.

85% of the fuel rise has been covered already and they are expecting to be back to margin growth next year.


Have you seen the market the last couple of days? We are heading for a down cycle in the economy and the airline industry. No airline will be able escape this.

Every company expects to grow in margins next year =) That's what they say in earnings call to assure the investors.


jagraham wrote:

Delta has been upsizing. Bigger planes, more premium seats. Except that 763nonER flying is almost completely gone and the premium seat ratio in the single aisle planes is less.

So the big question is - is the increased premium seat sales international or domestic?


If you look at their yield breakdown. This quarter just like the last was really good for TATL traffic and pretty good for TPAC. DL being the largest TATL carrier in US, benefits a lot more from this. Their domestic yield growth looks good, but nothing out of ordinary.

I'll be happy to put money on it.

Delta isn't American, United, JetBlue etc.
We did this with RASM a year or two ago. Delta said they would get back to positive RASM growth and did it, IIRC before their peers. All while people like you were talking about how the market is going down, they peaked etc. etc. blah blah blah.
But again, I'm more than willing to put my money where my mouth and Ed Bastian's mouth is. ;)
PlanesNTrains wrote:
We've been fortunate for longer than I thought with the economy. There will always be corrections and we appear overdue. I agree - what they say openly to investors is probably a bit rosier than what they are internally seeing on the horizon.

or we are just getting close to the election and the market is doing what it always does around election time......
 
jagraham
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 3:37 am

No airline will be able to escape a down cycle. But DL by flying a lot of older planes it owns will be hurt a lot less.
 
Planeflyer
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 4:09 am

Good job by DL and the economy. Love Delta’s service but fly them a lot less due to their high prices.
 
jetblueguy22
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 4:10 am

tphuang wrote:
deltal1011man wrote:
MIflyer12 wrote:

Southwest had fuel hedges. Delta doesn't. Jet A has been rising for a while - fairly continuously since Oct. '17. Fare & fee increases didn't cover the increased cost of fuel, let alone fuel+salaries. Delta reported higher after-tax earnings strictly due to a lower corporate tax rate. That won't save them next year.

Might want to listen to the earnings call.

85% of the fuel rise has been covered already and they are expecting to be back to margin growth next year.


Have you seen the market the last couple of days? We are heading for a down cycle in the economy and the airline industry. No airline will be able escape this.

Every company expects to grow in margins next year =) That's what they say in earnings call to assure the investors.

jagraham wrote:

Delta has been upsizing. Bigger planes, more premium seats. Except that 763nonER flying is almost completely gone and the premium seat ratio in the single aisle planes is less.

So the big question is - is the increased premium seat sales international or domestic?


If you look at their yield breakdown. This quarter just like the last was really good for TATL traffic and pretty good for TPAC. DL being the largest TATL carrier in US, benefits a lot more from this. Their domestic yield growth looks good, but nothing out of ordinary.

The market was due for a correction and anybody that thinks two bad days in a row equals a bull market shouldn’t be investing in anything but monopoly properties.

Delta pumping out another nice quarter. They’re turning into old reliable. Their product may not be way different than AA or UA, but they do a great job making themselves feel more premium.
Look at sweatpants guy. This is a 90 million dollar aircraft, not a Tallahassee strip club
 
stlgph
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 4:18 am

Revelation wrote:
JammyBritton27 wrote:
Nice quarter. Looks like passengers don't mind paying more for premium tickets (a 20% increase in premium product ticket revenue for DA). Let's see how other airlines report. https://news.alphastreet.com/us-airline ... to-expect/

The 'basic economy' strategy is working -- you make the baseline product so bad that anyone with the means will pay extra to avoid it.


??

Of basic economy offerings....Delta has always had the best deal going here.

Hell, they started offering assigned seats at check in rather than waiting to get to the airport gate.
if assumptions could fly, airliners.net would be the world's busiest airport
 
MSPNWA
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 4:28 am

I'm curious to see if DL's 4Q revenue outlook holds. They are in an uncharacteristic downward trend in load factor. It's hard to maintain PRASM with just yield increases.

Also, their outlook for 2019 non-fuel CASM to be held under 2% doesn't strike me as overly positive.

jagraham wrote:
No airline will be able to escape a down cycle. But DL by flying a lot of older planes it owns will be hurt a lot less.


It's a good thought, but it's the opposite effect on market share. Everything else equal, an older/more owned fleet is worse in a downturn as you hit the decision point to reduce capacity sooner (revenue=variable cost).
 
PlanesNTrains
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 5:19 am

deltal1011man wrote:
tphuang wrote:
deltal1011man wrote:
Might want to listen to the earnings call.

85% of the fuel rise has been covered already and they are expecting to be back to margin growth next year.


Have you seen the market the last couple of days? We are heading for a down cycle in the economy and the airline industry. No airline will be able escape this.

Every company expects to grow in margins next year =) That's what they say in earnings call to assure the investors.


jagraham wrote:

Delta has been upsizing. Bigger planes, more premium seats. Except that 763nonER flying is almost completely gone and the premium seat ratio in the single aisle planes is less.

So the big question is - is the increased premium seat sales international or domestic?


If you look at their yield breakdown. This quarter just like the last was really good for TATL traffic and pretty good for TPAC. DL being the largest TATL carrier in US, benefits a lot more from this. Their domestic yield growth looks good, but nothing out of ordinary.

I'll be happy to put money on it.

Delta isn't American, United, JetBlue etc.
We did this with RASM a year or two ago. Delta said they would get back to positive RASM growth and did it, IIRC before their peers. All while people like you were talking about how the market is going down, they peaked etc. etc. blah blah blah.
But again, I'm more than willing to put my money where my mouth and Ed Bastian's mouth is. ;)
PlanesNTrains wrote:
We've been fortunate for longer than I thought with the economy. There will always be corrections and we appear overdue. I agree - what they say openly to investors is probably a bit rosier than what they are internally seeing on the horizon.

or we are just getting close to the election and the market is doing what it always does around election time......


I'm of the belief that we will see an economic downturn regardless of an election. Happy to be wrong.
-Dave


”Yet somewhere in Iceland a great anger stirred in the soul of a troubled individual...” - Revelation
 
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LAX772LR
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 6:37 am

jagraham wrote:
But DL by flying a lot of older planes it owns will be hurt a lot less.

That mentality is stuck about 10yrs in the past:
DL is currently sporting new A359s, new A333HGWs, new 739s, new A321s..... with new A339s and new A220s freshly on the way.

Yeah they have some M88s/M90s/757s/etc that are owned and could be parked outright with little effect.
But it's nowhere near where it was last decade, compared to their newer acquisitions, and it's not all that different than their peers who also have 20ish-yr-old aircraft that could also be parked if needed.
I myself, suspect a more prosaic motive... ~Thranduil
 
tphuang
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 9:18 am

jetblueguy22 wrote:
tphuang wrote:
deltal1011man wrote:
Might want to listen to the earnings call.

85% of the fuel rise has been covered already and they are expecting to be back to margin growth next year.


Have you seen the market the last couple of days? We are heading for a down cycle in the economy and the airline industry. No airline will be able escape this.

Every company expects to grow in margins next year =) That's what they say in earnings call to assure the investors.

jagraham wrote:

Delta has been upsizing. Bigger planes, more premium seats. Except that 763nonER flying is almost completely gone and the premium seat ratio in the single aisle planes is less.

So the big question is - is the increased premium seat sales international or domestic?


If you look at their yield breakdown. This quarter just like the last was really good for TATL traffic and pretty good for TPAC. DL being the largest TATL carrier in US, benefits a lot more from this. Their domestic yield growth looks good, but nothing out of ordinary.

The market was due for a correction and anybody that thinks two bad days in a row equals a bull market shouldn’t be investing in anything but monopoly properties.

Delta pumping out another nice quarter. They’re turning into old reliable. Their product may not be way different than AA or UA, but they do a great job making themselves feel more premium.


of course 2 days do not mean the start of a recession. But it's clear that we have been at a historic high in terms of airline industry driven by cheap fuel and growing economy. Now, we are higher priced fuel (still not crazy high) and economy has been bubbling up for a while now if you look at. We are heading for a down cycle. DL will most likely do better than AA/UA, but I wouldn't expect 2015/2016 type of margins going forward.
 
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coronado
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 5:44 pm

I heard this in the 3Q earnings call stream and then checked over the transcript to double check what I thought I had heard and found it interesting that Paul Jacobson (CFO) said the following about fuel:
Quote: Certainly, the refinery helps us as does our integrated fuel strategy in which we continue to deliver results that are materially better than the industry average to the tune of $0.07 to $0.10 per gallon. Unquote

That is a significant advantage if they are getting their fuel for 3 to 5% less than their peers. Also note 10 of their 3Q 2018 10Q statement, (available either via Delta's web site under the About Delta and the Investor's Relations tab or at https://seekingalpha.com/filing/4199333?app=1#DAL930201810Q_HTM_S05A26A2E533A59A69001AA13098B5B68)
shows 2018 9 months operating income just for the refinery of $101million plus an additional $23million in interest income, less $48million in depreciation and amortization . And $67million are noted as Capex for the 9 months year to date for the refinery segment, basically what Delta is paying for one and one half worth of 737-900ER's.

It was also interesting to look at the refinery total revenues being just shy of $4.8 billion for the 9 months of 2018 so far, of which 866mm of jet fuel transferred directly to Delta, $3.1bn in other refined products exchanged for jet fuel used by Delta, and another $280million in other refined products sold into the market place. Total Jet Fuel expense for Delta (and its regional contracted lift providers) was just under $6.7bn, so Delta's Trainer refinery is responsible for just about 60% of the total jet fuel consumed by Delta (and its regionals). Fuel consumption in gallons (table on page 32 of the 10Q) was just over 3.1 billion gallons. Paul Jacobson's statement of a 7 to 10 cent per gallon lower price than industry average means that if Delta were just paying industry average prices they would be paying $200 to $300 million more (in the 9 months) that they actually paid for their fuel. That is a nice chunk of change.
But I understand the impetus to find a JV partner for the refinery, an entity that could just take and directly distribute all of the non jet fuel items (gasoline, diesel, heating oil) instead of Delta having to physically swap these items with other refineries for the jet fuel Delta needs. A partner like that would reduce Delta's exposure to volatility in the oil markets since presumably they Delta would only bear the volatility risk on the percentage of oil converted into jet fuel rather than on all of the by products of the cracking and refining process.
The Original Coronado: First CV jet flights RG CV 990 July 1965; DL CV 880 July 1965; Spantax CV990 Feb 1973
 
jagraham
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 7:59 pm

MSPNWA wrote:
I'm curious to see if DL's 4Q revenue outlook holds. They are in an uncharacteristic downward trend in load factor. It's hard to maintain PRASM with just yield increases.

Also, their outlook for 2019 non-fuel CASM to be held under 2% doesn't strike me as overly positive.

jagraham wrote:
No airline will be able to escape a down cycle. But DL by flying a lot of older planes it owns will be hurt a lot less.


It's a good thought, but it's the opposite effect on market share. Everything else equal, an older/more owned fleet is worse in a downturn as you hit the decision point to reduce capacity sooner (revenue=variable cost).


The benefit of an older / owned plane is the ability to park that plane without continuing mortgage or lease payments. Lesson learned from the last downturn. And the primary benefit. Any analyst can set up a spreadsheet and determine the exact date when the increased cost of a new plane are offset by fuel and maintenance savings. What the analyst can't tell you is if the economic assumptions built into that spreadsheet will hold up over the analysis period.
 
jagraham
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 8:06 pm

LAX772LR wrote:
jagraham wrote:
But DL by flying a lot of older planes it owns will be hurt a lot less.

That mentality is stuck about 10yrs in the past:
DL is currently sporting new A359s, new A333HGWs, new 739s, new A321s..... with new A339s and new A220s freshly on the way.

Yeah they have some M88s/M90s/757s/etc that are owned and could be parked outright with little effect.
But it's nowhere near where it was last decade, compared to their newer acquisitions, and it's not all that different than their peers who also have 20ish-yr-old aircraft that could also be parked if needed.


Delta is not interested in parking the entire fleet. Rather, they have estimates of how much impact a certain size of economic downturn will have on them and attempt to maintain a percentage of the fleet that can be easily parked. Assuming the operating cost isn't too high - as what happened to the MD80s when Pratt dropped support for the JT8Ds.
 
jbs2886
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 8:10 pm

coronado wrote:
I heard this in the 3Q earnings call stream and then checked over the transcript to double check what I thought I had heard and found it interesting that Paul Jacobson (CFO) said the following about fuel:
Quote: Certainly, the refinery helps us as does our integrated fuel strategy in which we continue to deliver results that are materially better than the industry average to the tune of $0.07 to $0.10 per gallon. Unquote

That is a significant advantage if they are getting their fuel for 3 to 5% less than their peers. Also note 10 of their 3Q 2018 10Q statement, (available either via Delta's web site under the About Delta and the Investor's Relations tab or at https://seekingalpha.com/filing/4199333?app=1#DAL930201810Q_HTM_S05A26A2E533A59A69001AA13098B5B68)
shows 2018 9 months operating income just for the refinery of $101million plus an additional $23million in interest income, less $48million in depreciation and amortization . And $67million are noted as Capex for the 9 months year to date for the refinery segment, basically what Delta is paying for one and one half worth of 737-900ER's.

It was also interesting to look at the refinery total revenues being just shy of $4.8 billion for the 9 months of 2018 so far, of which 866mm of jet fuel transferred directly to Delta, $3.1bn in other refined products exchanged for jet fuel used by Delta, and another $280million in other refined products sold into the market place. Total Jet Fuel expense for Delta (and its regional contracted lift providers) was just under $6.7bn, so Delta's Trainer refinery is responsible for just about 60% of the total jet fuel consumed by Delta (and its regionals). Fuel consumption in gallons (table on page 32 of the 10Q) was just over 3.1 billion gallons. Paul Jacobson's statement of a 7 to 10 cent per gallon lower price than industry average means that if Delta were just paying industry average prices they would be paying $200 to $300 million more (in the 9 months) that they actually paid for their fuel. That is a nice chunk of change.
But I understand the impetus to find a JV partner for the refinery, an entity that could just take and directly distribute all of the non jet fuel items (gasoline, diesel, heating oil) instead of Delta having to physically swap these items with other refineries for the jet fuel Delta needs. A partner like that would reduce Delta's exposure to volatility in the oil markets since presumably they Delta would only bear the volatility risk on the percentage of oil converted into jet fuel rather than on all of the by products of the cracking and refining process.


Very interesting quote and analysis. Unfortunately, a.net will break since it goes against their armchair CEO wisdom. At least 2 are active in this thread already, they love their DL bashing.
 
MSPNWA
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 8:15 pm

coronado wrote:
I heard this in the 3Q earnings call stream and then checked over the transcript to double check what I thought I had heard and found it interesting that Paul Jacobson (CFO) said the following about fuel:
Quote: Certainly, the refinery helps us as does our integrated fuel strategy in which we continue to deliver results that are materially better than the industry average to the tune of $0.07 to $0.10 per gallon.


DL was consistently paying less for fuel than other airlines prior to the refinery. That gap has not changed since the Trainer purchase. They must have some structural advantage in that area to explain it.

jagraham wrote:
The benefit of an older / owned plane is the ability to park that plane without continuing mortgage or lease payments. Lesson learned from the last downturn. And the primary benefit. Any analyst can set up a spreadsheet and determine the exact date when the increased cost of a new plane are offset by fuel and maintenance savings. What the analyst can't tell you is if the economic assumptions built into that spreadsheet will hold up over the analysis period.


But again, that theory is not rooted in economics. I hear it often when discussing DL, but it's not an economic advantage is today's environment of stable airlines with large, varied fleets. It's never a good thing to have to park more of your fleet because you can't fly it economically. The proper decision point to suspend operation of a certain capacity is reached first with inefficient aircraft. If your otherwise identical competitor has a more efficient aircraft, payments or not, they're still flying. That's the risk DL takes.
 
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LAX772LR
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 8:21 pm

jagraham wrote:
LAX772LR wrote:
jagraham wrote:
But DL by flying a lot of older planes it owns will be hurt a lot less.

That mentality is stuck about 10yrs in the past:
DL is currently sporting new A359s, new A333HGWs, new 739s, new A321s..... with new A339s and new A220s freshly on the way.

Yeah they have some M88s/M90s/757s/etc that are owned and could be parked outright with little effect.
But it's nowhere near where it was last decade, compared to their newer acquisitions, and it's not all that different than their peers who also have 20ish-yr-old aircraft that could also be parked if needed.


Delta is not interested in parking the entire fleet. Rather, they have estimates of how much impact a certain size of economic downturn will have on them and attempt to maintain a percentage of the fleet that can be easily parked. Assuming the operating cost isn't too high - as what happened to the MD80s when Pratt dropped support for the JT8Ds.

While I appreciate you stating the obvious, that really doesn't have much to do with the point being made: which was that DL's position in that regard, isn't really any different than their peers'.
I myself, suspect a more prosaic motive... ~Thranduil
 
Flighty
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Fri Oct 12, 2018 9:03 pm

MSPNWA wrote:

But again, that theory is not rooted in economics. I hear it often when discussing DL, but it's not an economic advantage is today's environment of stable airlines with large, varied fleets. It's never a good thing to have to park more of your fleet because you can't fly it economically. The proper decision point to suspend operation of a certain capacity is reached first with inefficient aircraft. If your otherwise identical competitor has a more efficient aircraft, payments or not, they're still flying. That's the risk DL takes.


You're right that old aircraft will be suspended first. That's because the downsize of doing that is zero. You park it, you furlough some employees or hire fewer employees and you are dug in for the crisis.

The downside of parking a new A350 is bigger, because you have to keep paying the $1m/month or whatever they cost. Maybe by flying it, you will only lose $700k/month, so you fly it. Meanwhile, the 763ER you can park and lose zero dollars per month. So you park it.

It is still the right decision to have cheap aircraft you can park in an emergency downturn situation. This is about optimizing when there is a 25% chance of a major recession or crisis in the next 8-10 years, the kind where pilots need to be furloughed. And that kind of crisis will happen again.

The risk Delta takes by having older planes is that the economy will be good and stable, but oil prices high for years to come. In that case, they should have bought new airplanes. Maybe we agree? I couldn't be sure.
 
jagraham
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Sun Oct 14, 2018 3:30 am

LAX772LR wrote:
jagraham wrote:
LAX772LR wrote:
That mentality is stuck about 10yrs in the past:
DL is currently sporting new A359s, new A333HGWs, new 739s, new A321s..... with new A339s and new A220s freshly on the way.

Yeah they have some M88s/M90s/757s/etc that are owned and could be parked outright with little effect.
But it's nowhere near where it was last decade, compared to their newer acquisitions, and it's not all that different than their peers who also have 20ish-yr-old aircraft that could also be parked if needed.


Delta is not interested in parking the entire fleet. Rather, they have estimates of how much impact a certain size of economic downturn will have on them and attempt to maintain a percentage of the fleet that can be easily parked. Assuming the operating cost isn't too high - as what happened to the MD80s when Pratt dropped support for the JT8Ds.

While I appreciate you stating the obvious, that really doesn't have much to do with the point being made: which was that DL's position in that regard, isn't really any different than their peers'.


DLs position is significantly different. AA is replacing just about everything except the 772s and intl 757s. Going for the fuel efficiency and lower maintenance. UA is somewhere in the middle.
 
Atlwarrior
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Sun Oct 14, 2018 5:45 am

jagraham wrote:
LAX772LR wrote:
jagraham wrote:

Delta is not interested in parking the entire fleet. Rather, they have estimates of how much impact a certain size of economic downturn will have on them and attempt to maintain a percentage of the fleet that can be easily parked. Assuming the operating cost isn't too high - as what happened to the MD80s when Pratt dropped support for the JT8Ds.

While I appreciate you stating the obvious, that really doesn't have much to do with the point being made: which was that DL's position in that regard, isn't really any different than their peers'.


DLs position is significantly different. AA is replacing just about everything except the 772s and intl 757s. Going for the fuel efficiency and lower maintenance. UA is somewhere in the middle.


Delta debt is also substantially lower than AA and UA correct?
 
michman
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Sun Oct 14, 2018 6:27 am

jetblueguy22 wrote:

The market was due for a correction and anybody that thinks two bad days in a row equals a bull market shouldn’t be investing in anything but monopoly properties.

Delta pumping out another nice quarter. They’re turning into old reliable. Their product may not be way different than AA or UA, but they do a great job making themselves feel more premium.


You mean bear, not bull. But, otherwise, I agree with your sentiment and that there's no point in trying to read tea leaves out of short term market movements. There were also some pretty big drops back in February and March of this year, and the market ended up recovering from those.
 
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LAX772LR
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Sun Oct 14, 2018 7:03 am

jagraham wrote:
DLs position is significantly different. AA is replacing just about everything except the 772s and intl 757s.

DL already has new-build replacements being delivered (or on imminent order) for almost everything in their fleet except the 777s, int'l 757s, and newest 767s.

Explain how that's "significantly different" from AA or UA....
I myself, suspect a more prosaic motive... ~Thranduil
 
jumbojet
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Sun Oct 14, 2018 12:37 pm

LAX772LR wrote:
jagraham wrote:
DLs position is significantly different. AA is replacing just about everything except the 772s and intl 757s.

DL already has new-build replacements being delivered (or on imminent order) for almost everything in their fleet except the 777s, int'l 757s, and newest 767s.

Explain how that's "significantly different" from AA or UA....


I don't believe, to the best of my knowledge, that a single A330, the workhorse of their international fleet, is being replaced.
 
phatfarmlines
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Sun Oct 14, 2018 3:59 pm

Atlwarrior wrote:

Delta debt is also substantially lower than AA and UA correct?


:checkmark: Yes a downturn will impact everyone but how you weather it depends on the debt carried. Debt ultimately kills a company (see recent developments on Sears). DL has done well in this arena, and continues to do so.

The one thing I hate about a Doug Parker leadership is the heavy leverage taken, and that hasn't changed since the HP/US days. And he always gets into a cost-cutting frenzy. Go figure.
 
Prost
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Sun Oct 14, 2018 6:05 pm

I believe Parker is on record as saying at the low rates they got for their debt, he felt it was riskier for AA not to have the debt on their books. Different management philosophies.
 
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LAX772LR
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Sun Oct 14, 2018 10:24 pm

jumbojet wrote:
LAX772LR wrote:
jagraham wrote:
DLs position is significantly different. AA is replacing just about everything except the 772s and intl 757s.

DL already has new-build replacements being delivered (or on imminent order) for almost everything in their fleet except the 777s, int'l 757s, and newest 767s.

Explain how that's "significantly different" from AA or UA....


I don't believe, to the best of my knowledge, that a single A330, the workhorse of their international fleet, is being replaced.

That title still rather easily belongs to the 767.

As for the A330, the reason it's not included, is because they're still taking new A330s............
I myself, suspect a more prosaic motive... ~Thranduil
 
jagraham
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Mon Oct 15, 2018 4:35 am

LAX772LR wrote:
jagraham wrote:
DLs position is significantly different. AA is replacing just about everything except the 772s and intl 757s.

DL already has new-build replacements being delivered (or on imminent order) for almost everything in their fleet except the 777s, int'l 757s, and newest 767s.

Explain how that's "significantly different" from AA or UA....


Let's see . . the MD80s would have stayed a while but Pratt dropped the JT8D like a hot potato . . they stopped inducting MD90s but the ones they have are staying a while (with extended timeouts for engine swaps while engines are shipped to Christchurch (covered elsewhere)) . . the 717s ate staying . . the A320s got life extended . . some used A320 series have come in . . the 757 fleet stabilized at a little over 100 instead of just the 30 something intl planes . . the 50something 767s are being extended and extended (even a couple of non-ER Pratts keep getting reprieve) . . did I miss anything? While AA replaces fleets wholesale (admittedly they had more MD80s) (and they keep having trouble with their 767s while DLs keep flying (??).
 
jagraham
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Mon Oct 15, 2018 4:39 am

Prost wrote:
I believe Parker is on record as saying at the low rates they got for their debt, he felt it was riskier for AA not to have the debt on their books. Different management philosophies.



EXACTLY!!! And at sub 3% rates, it was a legit bet. But payments still have to be made even during a downturn . . we shall see what the future holds. For now, an MD80 problem that could have crippled AA was resolved without missing a beat.
 
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LAX772LR
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Mon Oct 15, 2018 5:04 am

jagraham wrote:
did I miss anything?

Yeah, the fact that essentially everything you just mentioned has a direct replacement either on order, or already being delivered, at DL.

Not sure how that realization keeps eluding you. :confused:
I myself, suspect a more prosaic motive... ~Thranduil
 
jagraham
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Mon Oct 15, 2018 9:12 am

LAX772LR wrote:
jagraham wrote:
did I miss anything?

Yeah, the fact that essentially everything you just mentioned has a direct replacement either on order, or already being delivered, at DL.

Not sure how that realization keeps eluding you. :confused:


All of those planes will be around at least 7 more years. Some much more.

Yes DL is receiving new planes, but the mainline fleet is growing. Almost 150 planes in the last 3 years.
 
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LAX772LR
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Tue Oct 16, 2018 6:31 am

jagraham wrote:
LAX772LR wrote:
jagraham wrote:
did I miss anything?

Yeah, the fact that essentially everything you just mentioned has a direct replacement either on order, or already being delivered, at DL.

Not sure how that realization keeps eluding you. :confused:


All of those planes will be around at least 7 more years. Some much more.

Once again, how is that effectively different than AA and especially UA? ...each of whom have some 20yr+ aircraft that aren't going anywhere in the next few years either.
I myself, suspect a more prosaic motive... ~Thranduil
 
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spinotter
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Tue Oct 16, 2018 7:29 pm

LAX772LR wrote:
jagraham wrote:
LAX772LR wrote:
Yeah, the fact that essentially everything you just mentioned has a direct replacement either on order, or already being delivered, at DL.

Not sure how that realization keeps eluding you. :confused:


All of those planes will be around at least 7 more years. Some much more.

Once again, how is that effectively different than AA and especially UA? ...each of whom have some 20yr+ aircraft that aren't going anywhere in the next few years either.


Just for the health of the planet, I hope that every airline keeps their planes as long as possible. And from everything that I read here, DL's planes are all in good condition - as are UA's and AA's, if one is not a spoiled brat. What, using resources endlessly for an infinitesimal increment of human comfort? Then I wish apocalypse upon you all!
 
jumbojet
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Tue Oct 16, 2018 8:43 pm

UA's results are in for the same quarter. Two of the top performance parameters compared to DL:

UA net income 836 million (DL 1.3 billion)
UA revenue 11 billion (DL 11.95 billion).
 
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LAX772LR
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Re: Delta Air Lines Announces 2018 September Quarter Profit

Wed Oct 17, 2018 2:10 am

spinotter wrote:
Just for the health of the planet, I hope that every airline keeps their planes as long as possible.

That doesn't make much sense.

Getting rid of older planes for new tech, sends metal back into industrial sections where it's needed, thus decreasing the need for new mining; while allowing modern aircraft (that consume far less fossil fuels and create far less air pollution) made primarily from synthetic materials on more energy-efficient production lines, to take their place.
I myself, suspect a more prosaic motive... ~Thranduil

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