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Delta Posts Record Earnings Thanks To Lower Fuel Costs

By Thomas Kuegler
Published on: 03:31 PST, Jan 19, 2016

Delta posted $926 million in net income for the fourth quarter of 2015. USA Today reports they credit lower fuel costs and other cost-saving methods for their fourth quarter success.

Overall, Delta pulled $4.5 billion in net income for the year, which analysts say could be record industry earnings.

“Our 2015 performance was a record for Delta on all fronts – with industry leading operational performance, superior customer satisfaction and a $5.9 billion adjusted pre-tax profit,” CEO Richard Anderson said in a statement. “As we look ahead to 2016, we have a significant opportunity to improve our performance even further.”

The Street reports that Delta’s stock price has risen 3.35 percent in early trading on Tuesday thanks to the news, posting a price of $45.99.

Delta was able to give back $530 million to shareholders in dividends during the fourth quarter. They also bought back $2.2 billion worth of shares during 2015, which is a great sign to investors everywhere.

“These results show the commitment of the Delta people to running the best airline in the world every day,” Anderson said.

Delta is one of the most efficient airlines in the business, posting a high completion rate for flights and an impeccable record for on-time flights.

In the end, Delta has descending fuel prices to thank for their financial success. During the fourth quarter, fuel prices lowered to $1.50 per gallon, which is quite the discount compared to the $2.54 mark it was at last year.

In fact, Delta spent $11.2 billion on fuel in 2014, and last year they spent just $8.9 billion, saving them close to $3 billion. It wasn’t just fuel prices that descended during the year for Delta, they also implemented a number of cost-saving initiatives too.

“As we look ahead to 2016, we have a significant opportunity to improve our performance even further,” CEO Richard Anderson continued. “With over $3 billion in potential savings from lower fuel prices and numerous commercial, operational and cost initiatives already in place, we expect to again perform in the top tier of the S&P Industrials on earnings growth, margins, and cash flows this year despite global economic challenges.”

Delta is certainly benefiting from the lower fuel costs, but what about the airline industry as a whole?

“The airlines will continue to benefit from lower jet fuel costs as they were profitable with oil up to $114 per barrel and are clearly quite profitable at current levels, even with [fare] discounting,” said Helane Becker, an analyst with Cowen and Co.

“The overall demand environment remains solid,” Delta President Ed Bastian said in a statement.

He continued, saying the airlines size will allow it to focus “on those areas of the business with the best opportunity such as the domestic marketplace, while reducing our exposure in some weaker international regions.”

Delta is doing well, but their competitor, American Airlines, just got sued over discrimination allegations. CBS News reports that four men from Brighton Beach sued the popular airline because they feel they were racially profiled.

“They came to us and said, you know, ‘Take our belongings and exit the aircraft.’ At that point, like, everybody just around us was just, like, looking at us,” Alal, one of the four men, said. “The way she said it wasn’t, like, low either, so it was at least like three rows ahead.”

Today, airlines face a number of conflicts, but the price of fuel isn’t one of them anymore. Time will tell how Delta and other popular airlines can perform in the future thanks to these market opportunities.

[Photo by David Mcnew/Getty Images]

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