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Delta’s domestic, Latin American markets grow at higher rates

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Traffic growth

Delta Air Lines’s passenger traffic increased, but its cargo traffic declined in November 2014, just as it did in October. Revenue passenger miles (or RPM), or passenger traffic, is calculated as the number of paying passengers multiplied by the total distance traveled. Delta Air Lines’s (DAL) RPM increased by 4.8% year-over-year (or Y-O-Y) in October and by 5% in November.

Passenger revenue per available seat mile (or PRASM), or unit revenue, increased by 3% Y-O-Y in October and 4.5% in November. The indicator shows the company’s ability to generate higher revenue per seat, which is essential to increase margins.

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Domestic traffic growth

Domestic market traffic growth remained stronger than the international market.

  • Although domestic market RPM increased by 6.9% in October and 7.4% in November, international market RPM increased only by 1.8% in October and 1.2% in November.
  • In the international market, November volumes increased by 8.7% in Latin America and in the Atlantic region by 0.9%, but declined by 3.3% in the Pacific region. Also, traffic growth in October was the highest in Latin American traffic (13.9%), but there was a slight decline in both the Atlantic and Pacific regions.

On a year-to-date basis, domestic passenger traffic grew by 5% and in the international market by 3.1%. Plus, cargo ton miles, measuring freight traffic, increased by 0.8% during the same period.

Higher growth in international capacity

The growth in traffic for Delta Air Lines (DAL) was supported by a 3.6% growth in capacity in November. Growth in Delta’s traffic capacity was higher than United Continental Holdings (UAL) and American Airlines (AAL), but it was lower than Alaska Air Group (ALK), JetBlue Airways (JBLU), and Southwest Airlines (LUV).

Delta’s capacity growth in November was higher in the international market. International available seat miles (or ASMs) increased by 4.5%, but its load factor, or seat occupancy rate, declined by 2.5%. The highest growth, 14.5%, was recorded in the Latin American market.

Despite an increase in traffic along with capacity, the load factor for the market declined by 4.2% to 79.6%. Load factors in the Atlantic and Pacific markets fell by 2% and 2.2%, respectively. Delta’s domestic capacity increased at a lower rate of 3%, but utilization increased by 3.4% to 82.1% in November 2014.

Delta is part of more than 70 ETFs. ETFs that hold Delta Air Lines stock include the SPDR S&P Transportation ETF (XTN) and the PowerShares DWA Consumer Cyclical Momentum Portfolio (PEZ). For a complete company overview of Delta Air Lines, read Market Realist’s series Investing in Delta Air Lines: A must-know company overview.

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