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Delta Air Lines Traffic Grows despite Flat Capacity Growth

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Traffic growth

Delta Air Lines’ (DAL) total traffic grew at a significantly higher pace than its capacity. Capacity growth is a major driver for airlines. Traffic grew despite flat capacity growth, which is a good sign for the airline. For May 2017, DAL’s traffic grew 1.7% YoY (year-over-year), and for April 2017, its traffic grew 1.6% YoY.

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Domestic traffic grew

The domestic region has been the major contributor to Delta Air Lines’ traffic growth for May 2017. That’s been the case throughout 2017. This was an unexpected outcome since Delta has been growing capacity in the region, as we saw in the previous part of this series.

For May 2017, DAL’s domestic traffic grew 2.9% YoY, which was higher than its 2.1% capacity growth in the same period.

Peers American Airlines (AAL), United Continental Holdings (UAL), and Alaska Air Group (ALK) have not reported their May 2017 results yet.

International traffic fell slightly

For May 2017, Delta Air Lines’ international traffic fell slightly by 0.10% YoY after a 3.8% growth in April 2017. That was expected since DAL has been cutting capacity in the region.

The highest fall in international traffic was in the Pacific region, which saw a 15.3% YoY fall in traffic. The Atlantic region rose 4.7% YoY in May 2017, while the Latin American region saw the highest growth of 7.9% YoY.

Outlook

For the first two months of 2Q17, Delta Air Lines traffic had an average growth of 1.7% YoY. The average capacity growth in the same period was -0.80% YoY. This mismatch led to improving yields, as we’ll see in the next part of this series.

You can gain exposure to Delta Air Lines by investing in the PowerShares Dynamic Leisure & Entertainment ETF (PEJ), which invests 5.1% of its holdings in the airline.

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