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Delta Says There’s More Than Just Cheap Fuel Behind Record Profits

Delta Air Lines expects revenue this year to outpace the company’s record-shattering 2015 profits reported on Tuesday.

On Tuesday, Delta reported an adjusted pre-tax income of $5.9 billion for the four quarters of 2015. That number represents a nearly 29 percent jump in earnings performance over the previous year. Company officials told investors that similar gains can be expected in the coming year.

Delta management admits that historically low fuel costs have helped to launch the record profit reports, but shortly after the earnings report was released on Tuesday, Delta VP of Investor Relations Jill Groileer took to the company’s website to explain that the low price of jet fuel isn’t the only reason for the legacy carrier’s unprecedented profits. Greer noted that while the airline is happy to be reporting record-breaking profits, it is worth noting that Delta and the industry as a whole are seeing a decline in unit revenues.

Greer told investors that Delta has an edge in this area. She insists Delta is able to consistently outperform the competition when it comes to unit revenues. “This is happening for a number of reasons, but mainly because we have the best operations and better products and services,” she noted. “The price of a ticket isn’t the only factor in our customers’ travel decision-making process. For many customers, they’re willing to pay a premium to fly on the airline they trust to consistently get them home on time.”

Greer points to business decisions made nearly a decade ago as a big part of the reason the airline has been able to capitalize on the recent low oil prices. “We built the foundation for Delta to be consistently and sustainably profitable throughout the business cycle at oil prices of $100 or more per barrel,” she said. “So right now, we’re more or less in the sweet spot with market jet fuel prices at around 90 cents per gallon.”

Delta officials argue that strict cost discipline and a commitment to paying down corporate debt have not only helped to lead to the company’s best profits ever, but will also allow the airline to remain profitable when fuel prices eventually rise again. In the meantime, cheap fuel is helping to mitigate strains on profitability that the company has identified which include fierce domestic competition, a decline in demand for overseas destinations and a weaker euro.

[Image: Delta Air Lines]

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2 Comments
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Azzuristar January 21, 2016

TIme to up the service or lose the MEA

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mmff January 21, 2016

For those wondering, 90 cents per gallon = $37.80 per barrel.