Delta Airlines’ domestic revenue remains strong in October

Teresa Cederholm - Author

Nov. 20 2014, Updated 4:31 p.m. ET

Domestic market drives traffic growth

In October 2014, Delta’s passenger traffic increased, but its cargo traffic declined. The airline’s passenger revenue per available seat mile (or PRASM), or unit revenue, increased by 3% year-over-year. Delta’s October 2014 PRASM shows the company’s ability to generate higher revenues per seat, an essential factor in increasing its margins.

Traffic, or revenue passenger miles (or RPM), is calculated as the number of paying passengers multiplied by the total distance traveled. Delta Air Lines, Inc.’s (DAL) RPM increased by 4.8% year-over-year (or Y-O-Y) to 17,037 million, driven by higher growth in the domestic market.

  • Domestic market RPM increased by 6.9%.
  • International market RPM increased by 1.8%. In the international market, volume increased only in the Latin American market by 13.9%. There was a slight year-over-year decline in traffic in both the Atlantic and Pacific regions.

The year-to-date traffic growth also showed higher growth in domestic passenger traffic at 4.8% than in the international market, at 3.3%. Plus, cargo ton miles, which measures freight traffic, increased by 1.1% during the same period.

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Higher growth in international capacity

The growth in traffic for Delta Air Lines (DAL) was supported by a 3.6% growth in capacity in October. This represents the third highest capacity growth recorded that month among the top six airlines. Alaska Air Group Inc. (ALK) recorded the highest growth, 10.9%, followed by JetBlue Airways Corporation (JBLU), which recorded 7.6% growth. Capacity growth for United (UAL), American (AAL), and Southwest (LUV) was less than 1%.

Delta’s capacity growth in October was higher in the international market. International available seat miles (or ASMs) increased by 4.3%, although utilization declined by 2.1%. The highest growth, 14.8%, was recorded in the Latin American market. Because there was good growth in demand in Latin America, the decrease in load factor was lower compared to the Atlantic and Pacific markets. Load factors in the Pacific and Atlantic markets fell by 2% and 2.6%, respectively, as capacity grew despite a decline in traffic.

Domestic capacity increased at a lower rate of 3%, but utilization increased by 3% to 85.1% in October 2014, compared to 82.1% in 2013.

Delta is part of more than 70 ETFs. Some of the ETFs that hold more than 2% of their holdings in Delta Airlines stock are the iShares Transportation Average ETF (IYT), the PowerShares DWA Consumer Cyclical Momentum Portfolio (PEZ), the PowerShares Dynamic Market Portfolio (PWC), and the SPDR S&P Transportation ETF (XTN).

For a complete overview of Delta Air Lines, read Market Realist’s series, Investing in Delta Air Lines: A must-know company overview.


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