Delta Sees Profit Growth Despite Caution

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Published: December 15, 2011

Delta Air Lines said it expects profit growth in 2012, aided by healthy corporate travel, despite economic challenges in Europe and cost pressures.

“We expect the economic growth picture around the world to be positive but, candidly, to be a bit slow, particularly in Europe, where we’re expecting that we’ll see some recessionary effects coming from the eurozone crisis,” president Ed Bastian told the airline’s investor meeting.

Bastian said that in Europe, Delta plans to cut its capacity 7 percent next year.

Still, he added that 2012 should be “a year of earnings growth,” as corporate travel is expected to rise and service cuts help airlines recover higher fuel costs. For 2011, Delta projected a profit of roughly USD$ 800 million after items.

Most US airlines have posted profits this year, aided by service cuts, higher fares and retirement of less fuel-efficient planes. But broad economic skittishness looms as a threat to overall demand for air travel.

Atlanta-based Delta said it expects an operating margin of 6 to 8 percent for the 2011 fourth quarter, compared with a previous forecast of 5 to 7 percent.

Passenger revenue per available seat mile is expected to rise 11 percent to 12 percent in the last calendar quarter.

As economic woes crimp activity in Europe and the United States, Delta is expanding ties in emerging markets to fuel growth. Earlier this month, it agreed to invest USD$ 100 million in Brazilian carrier Gol to increase access to Latin America’s largest travel market. Over the summer, it also expanded a partnership with Aeromexico.

Delta also banking on product and facility investments in hopes of winning new passengers and enticing existing ones to spend more. It has installed fully reclining seats on some aircraft and is upgrading its facilities at many airports, including a USD$ 1 billion refurbishment under way at John F. Kennedy Airport, New York.

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