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Why Delta achieved most of its targets for 3Q14

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Achievements and target

In previous parts in this series, we discussed how Delta performed in the third quarter. We also discussed the major events that affected the company’s operations and profitability during the quarter.

In this part of the series, we’ll see if Delta was able to achieve its targets for 3Q14. We’ll also discuss Delta’s plans for the next quarter.

Part14_Targets

  • Delta achieved almost all of its targets in regards to fuel price, profit sharing expense, and overall system capacity. However, it failed to achieve its margin target in 3Q14. This was mainly due to special charges incurred in fleet restructuring and fuel hedging activities.
  • However, after adjusting for these special charges, the operating margin for 3Q14 was 15.8%. This is within the estimated range. For the fourth quarter, Delta wanted to achieve a margin of 10%–12%.
  • Delta (DAL) was able to achieve its fuel price target. Its 3Q14 fuel price per gallon was $2.90. Delta estimated that it would be between $2.88 and $2.93. Delta’s average fuel price per gallon of $2.90 was the lowest among its peers. United’s (UAL) was $3.02. Alaska’s (or ALK) was $3.15. American’s (AAL) was 2.97. Southwest’s (LUV) was $2.99. As a result of falling crude oil prices, Delta estimates fuel price will be $2.69–$2.74. This is lower than in 3Q14.
  • Non-operating expense increased to $256 million due to a loss from extinguishing $134 million in debt. Due to debt repayment and leverage reduction, interest expense decreased by 20% to $140 million.

Delta is part of many exchange-traded funds (or ETFs) including the iShares Transportation Average ETF (IYT) and the PowerShares DWA Consumer Cyclicals Momentum Portfolio (or PEZ). Investors can gain access to Delta through these ETFs.

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