Delta Air Lines (DAL) February Traffic Falls, Stock Down

Atlanta, GA-based Delta Air Lines DAL posted a decline in air traffic for the month of Feb 2017. Consolidated traffic – measured in revenue passenger miles (RPMs) – came in at 14.13 billion, down 1.7% year over year. Domestic RPMs declined marginally. However, it was the 4.4% fall on the international front, which hurt the metric more.

On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) declined 3.4% to 17.43 billion. The metric declined 1.6% and 6.3% on the domestic and international fronts, respectively. However, consolidated load factor, or percentage of seats filled by passengers, improved 140 basis points to 81.1%. This is because capacity contraction was more than the traffic decline in the month. Additionally, the airline recorded an 89.4% on-time performance and 99.5% completion factor for the same month.

Consolidated passenger unit revenue (PRASM: a key measure of unit revenue) remained flat on a year-over-year basis in the month. In fact, this marked an improvement from the January reading when the metric had declined 2.5%, mainly due to winter storm Jonas.

Moving ahead, Delta expects improvement in the metric to continue in March as well. We note that carriers like American Airlines Group AAL and Alaska Air Group ALK had displayed growth with respect to unit revenues in the fourth quarter of 2016 as woes pertaining to this key metric seem to be easing.

Presently, Delta expects PRASM for the first quarter of 2017 in the range of flat to a 2% increase. Despite the improvement in February, the carrier might fall short or report at the lower end of its guidance in the first quarter, given the disappointment in January. Consequently, a downward revision of the first-quarter PRASM guidance cannot be ruled out in the coming days.

Delta Stock Struggling

The disappointing February traffic data disappointed investors. As a result, the stock declined 2.1% to $49.96 on Mar 2. In fact, shares of this airline behemoth have struggled of late due to multiple headwinds, like the moderate fourth-quarter earnings report, released in January, subsequent technological failure as well as unimpressive traffic reports so far this year. These factors have contributed to the stock underperforming the Zacks categorized Transportation-Airline industry on a year-to-date basis. While the stock gained only 1.6% so far this year, the industry gained 10.6%.

Zacks Rank & A Key Pick

Currently, Delta has a Zacks Rank #3 (Hold). A better-ranked airline stock  is SkyWest Inc. SKYW, which carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

SkyWest has an impressive history with respect to earnings per share, having outshined the Zacks Consensus Estimate in each of the last four quarters by an average of 34.6%.

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Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
 
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