Delta Q4 profits hit $980 million thanks to sinking gas prices

Delta Air Lines profits Q4

Delta Air Lines earned $980 million in the fourth quarter despite lower revenue than a year ago. The jump in profits is attributed to lower gas prices.

Delta shares jumped 3.3% on Tuesday, as the company recovered nearly one-fourth of its losses on the month.

The company also said bookings are ahead of last year’s pace thanks to lower gas and heating bills that have given consumers more disposable income.

“They seem to be willing to re-invest that into airline purchases but at slightly lower fares,” said Glen Hauenstein, Delta’s executive vice president of revenue management. “We see demand as very strong.”

Investors are concerned that airlines are adding too many flights while fuel is relatively cheap. Adding more flights can push the price per ticket lower, leading to less profit.

Delta and its Delta Connection affiliate saved nearly $2.8 billion, or nearly 65%, on fuel compared with late 2014. The company now spends less on fuel than it does on labor.

Delta’s largest expense was a 9% increase in salaries and benefits.

Delta expects to pay about $1.20 to $1.25 per gallon for fuel in the first quarter, a pretty big decrease from the $1.85 it paid in the fourth quarter.

 

Revenue fell 2% to $9.50 billion, which Delta blamed on losses due to currency exchange rates. FactSet said analysts predicted $9.61 billion.

While customers flew more, they paid approximately 2% less per mile because of lower average fares. The company expected the cost per mile to fall another 2.5% to 4.5% in the first quarter of 2016.

 

Shares of Delta Air Lines Inc. rose $1.46 to close at $45.96 on Tuesday. Shares at the company are down 12% since January 1.