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Viking Global Increased Its Position in Delta Air Lines

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Mar. 18 2015, Updated 10:05 a.m. ET

Viking Global and Delta Air Lines

Viking Global Investors increased its position in Delta Air Lines (DAL) by over $363 million in the stock. It represented 1.99% of the total portfolio in 4Q14—up from 0.28% in the third quarter.

You can gain exposure to Delta Air Lines by investing in the Industrial Select Sector SPDR Fund (XLI). Delta accounts for about 1.86% of XLI.

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Overview of Delta Air Lines

Delta Air Lines provides scheduled air transportation for passengers and cargo throughout the US and around the world. The following entities are part of the company’s route network:

  • Air France–KLM
  • Alitalia
  • Virgin Atlantic
  • Aeroméxico
  • Gol Linhas Aereas Inteligentes
  • SkyTeam, a global airline alliance
  • multiple domestic regional carriers that operate as Delta Connection
  • other foreign airlines

On February 13, Delta employees received $1.1 billion in profit sharing in recognition of the company’s “industry-leading” 2014 performance. According to Delta, this was the highest payout for the airline industry and for any US corporation during any given year. Delta paid out $2.9 billion to employees in profit sharing over the past five years.

Delta Airlines partners with Gogo Inc. 

In February 2015, Delta announced its partnership with Gogo Inc. (GOGO) in order to use the firm’s next generation technology in some of its aircraft. Delta stated that it’s planning to use Gogo’s 2Ku technology in over 250 of its airplanes. This technology will help deliver speeds up to 70 megabits per second when it launches.

Delta is also planning to partner with Gogo when the firm launches its “air to ground technology” for shorter flights in the US. After the announcement of this partnership with Delta, Gogo’s shares were up by nearly 7.9%.

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4Q14 earnings beat consensus

For 4Q14, Delta reported diluted EPS (earnings per share) of $0.78 versus the consensus forecast of $0.75. Sales grew 6% year-over-year, or YoY, and traffic increased 4%. The company noted, “We can continue to generate top-line growth as we realize additional benefits from our Virgin Atlantic joint venture, restructure our Pacific network, gain additional corporate share, and ramp up our merchandising efforts with branded fares and enhanced customer segmentation.”

In 2014, Delta’s revenue grew by 7%. The operating margin improved by four points to 13.1%. For the year, Delta’s net income was $2.8 billion.

Delta pays dividends

The free cash flow generated by Delta during 4Q14 was $3.7 billion. The firm returned ~$1.35 billion to shareholders by dividends of $251 million as well as share repurchases of $1.1 billion. On February 6, 2015, Delta declared a dividend of $0.09 per share.

Delta outperforms the S&P 500 Index

Delta shares increased by 77%—compared to the S&P 500 Index increase of 11.3% for 2014. Southwest (LUV) shares skyrocketed. They increased more than 100% in 2014. JetBlue (JBLU) shares increased 84%. Alaska Air Group (ALK) shares increased by 63%.

In the next part of this series, we’ll discuss Viking Global’s position in Cheniere Energy.

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