ATLANTA -- Delta Air Lines Inc. said Wednesday that second-quarter earnings rose 17 percent, topping analysts' expectations, as passengers flew more miles at higher average fares and fuel spending declined.
The results from Delta, the world's third-biggest airline company, produced a strong opening to the industry's results for the busy April-to-June quarter. American and United are scheduled to report second-quarter figures today, and analysts expect the biggest U.S. carriers to post large profits.
Delta said it benefited from gains in corporate contracts and domestic traffic. Like other airlines, Delta has been adding flights cautiously and instead is putting more passengers on each plane. The average flight was 86.3 percent full, a figure that would have seemed impossible not long ago.
By limiting seats or capacity, airlines can keep fares high. Chief Executive Officer Richard Anderson said Delta would continue its "disciplined approach" to adding new flights.
"This discipline continues to be a key driver of our success, as we will post record results for 2014," Anderson said on a conference call with analysts. "We see a good demand environment, combined with modest capacity increases that will result in solid [revenue] growth."
The average fare per mile climbed 3.8 percent, and Delta also collected more from what it calls merchandising, such as charging extra fees for a roomier seat and for priority boarding.
The company's operating margin climbed to 15.1 percent, and it predicted margins of 15 percent to 17 percent in the third quarter.
For the third quarter, however, Delta predicted slower growth in so-called unit revenue -- the amount of money taken in for every seat flown 1 mile. That figure is closely watched in the airline business, and it jumped 5.6 percent in the second quarter. Delta predicted an increase of between 2 percent and 4 percent for the July-to-September period, compared with the same months in 2013.
JPMorgan analyst Jamie Baker said that while the unit-revenue forecast might disappoint some investors, Delta's overall guidance including margin was strong.
S&P Capital IQ analyst Jim Corridore slightly raised his estimates of per-share earnings in 2014 and 2015. He praised the company for reducing debt, buying back shares and investing in the fleet and said it would likely produce better returns than other airlines.
For the second quarter, the Atlanta-based company said net income increased to $801 million, or 94 cents per share, from $685 million, or 80 cents per share, in the same quarter a year ago.
Earnings, adjusted for one-time gains and costs, were $1.04 per share. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.03 per share.
The company said revenue climbed 9.4 percent to $10.62 billion from $9.71 billion in the same quarter a year ago, and beat Wall Street forecasts. Analysts expected $10.59 billion, according to Zacks.
Fuel spending dropped 6 percent to $2.43 billion, offsetting a 6 percent gain in labor costs to $2.05 billion.
Delta shares rose $1.47, or 4 percent, to close Wednesday at $39.15. Through Tuesday, they had gained 37 percent on the year, while the Standard & Poor's 500 index had increased 7.3 percent.
Business on 07/24/2014