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Delta Air Lines’ Traffic Growth Puts On A Positive Show

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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 growing at a higher pace than capacity growth is good news as it signals higher demand and improves capacity utilization. In August 2017, Delta’s traffic grew 6.9% YoY (year-over-year). Year-to-date (or YTD), DAL’s traffic had risen 2.3% YoY.

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Domestic traffic grows

As has been the case throughout 2017, the domestic region has been the main contributor to Delta’s traffic growth for the month. Delta’s higher capacity growth in the region has also led to this outcome.

In August 2017, Delta’s domestic traffic grew 9.5% YoY. So far in 2017, it had grown 3.7% YoY. Peers American Airlines (AAL), United Continental (UAL), and Alaska Air Group (ALK) have yet to report their August 2017 results.

International traffic declines slightly

In August 2017, Delta Airlines’ international traffic grew 3.2% YoY. International traffic has been quite volatile in 2017. As of August, YTD international traffic growth was almost flat at 0.2% YoY.

So far this year, the Pacific region has seen an 11.2% YoY decline in its traffic. The Atlantic region grew 4.5% YoY, while Latin American traffic grew 4.8%.

Outlook

For the first two months of 3Q17, Delta’s traffic has recorded an average growth of 4.8% YoY. The average capacity growth in the same period was 2.1% YoY. This mismatch has led to improving utilization, as we’ll discuss in our next article. Investors can gain exposure to Delta Air Lines by investing in the iShares US Consumer Services ETF (IYC), which invests 1.1% of its holdings in the stock.

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