uploads///Revenue

Unit Revenue Growth Finally Looking Up for Delta

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Jul. 5 2017, Published 10:12 a.m. ET

Analyst estimates

Delta Air Lines’ (DAL) revenue is expected to rise 3.0% year-over-year (or YoY) to $10.8 billion in 2Q17, 5.1% to ~$11.0 billion in 3Q17, and 3.4% to $9.8 billion in 4Q17. For the full year 2017, revenues are expected to grow 2.7% to $40.1 billion.

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Unit revenues to rise

For 1Q17, Delta Air Lines’ passenger per available seat mile (also known as unit revenues) fell 0.5% year-over-year. For 2Q17, Delta Air Lines had forecasted unit revenue growth of 1%–3%. The traffic numbers from the first two months of the quarter show that Delta is on the path to achieving the upper end of this guidance. Traffic figures would have been even higher if it weren’t for the Atlanta storms in April.

Outlook

Delta Air Lines expects to increase capacity in the range of 0%–1% in 2Q17 and the full year 2017. American Airlines (AAL) has a similar capacity growth target, while United Continental (UAL) has increased its capacity growth target to 2.5%–3.5% YoY. Southwest Airlines (LUV) has guided for capacity growth of 3.5% YoY in 2017.

The increasing capacity discipline among major airlines could help boost unit revenues further. This is good news for Delta investors, as improving unit revenues could mean improved profitability. Investors can get exposure to Delta Air Lines stock by investing in the First Trust Nasdaq Transportation ETF (FXR), which invests 4.2% of its portfolio in the airline.

Next, we’ll discuss other factors that could help boost the airlines’ revenue.

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