Delta March Traffic Up on Strong Demand - Analyst Blog

Leading passenger and cargo carrier Delta Air Lines Inc. DAL reported growth in traffic for March 2014 on the back of strong domestic demand. Passenger revenue per available seat mile (PRASM) improved 1.0% year over year. However, the shift of Easter to April has impacted its March revenues.

The company's airline traffic – measured in revenue passenger miles or RPMs, which imply revenue generated per mile per passenger – moved up 3.9% year over year to 17.11 billion. Consolidated capacity (or available seat miles/ASMs) for the month, increased 3.2% from March 2013 to 20.01 billion. The carrier expects its combined passenger unit revenue of March and April to rise 3–4% on an annualized basis.

The load factor or percentage of seats filled by passengers leaped 60 basis points from Mar 2013 to 85.3%. The company registered a completion factor of 99.8%, with nearly 84.3% of flights on schedule.

For the first three months of 2014, Delta generated RPMs of 44.60 billion (up 3.5% from the corresponding period last year) and ASMs of 53.90 billion (up 1.7% year over year). The load factor improved 150 basis points year over year to 82.7%.

In 2014, Delta is expected to generate higher revenues than last year on strong domestic market, capacity discipline, cost control measures and customer-focused initiatives. Consequently, investors can look forward to higher returns from this well-placed carrier.

Further, Delta is reaping the benefits of its tie up with Virgin Atlantic as it is picking up in the lucrative New York-London travel route. Owing to its widened network in the U.S. and Europe, Delta-Virgin passengers will have more flight options from New York and London, and thus strengthen the prospect of the joint venture.

However, the mega merger between American Airlines and U.S. Airways Group to form American Airlines Group Inc. AAL remains a major competitive threat to the company in both domestic and international markets.

Delta carries a Zacks Rank #2 (Buy). Other stocks worth considering within the industry include Southwest Airlines Co. LUV and Alaska Air Group Inc. ALK, both with the same Zacks Rank as Delta.