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Delta Air Lines minimising growth; United expected to report first quarterly profit since 3Q2007

Analysis

The majority of North and South American airline shares declined on Monday (19-Jun-2010) after Delta Air Lines stated it does not expect to grow much over the next year. In comparison, the Dow (+0.6%) rose on news of improved financial results from Halliburton and a stronger order outlook from Boeing.

Summary
  • Delta Air Lines does not expect significant growth in the next year, leading to a decline in airline shares in North and South America.
  • Despite reporting its largest quarterly profit in ten years, Delta Air Lines experienced a decline in share value.
  • United Airlines is expected to report its first quarterly profit since 3Q2007.
  • LAN Airlines saw a steady increase in share value.
  • Jazz Air Income Fund also experienced a rise in share value.
  • The Dow rose due to improved financial results from Halliburton and a stronger order outlook from Boeing, despite disappointing results from other companies and a decline in homebuilder sentiment.

The climb in the Dow was despite disappointing financial results from other companies and a greater than expected decline in homebuilder sentiment for Jul-2010.

Delta Air Lines minimising growth

Delta Air Lines (-2.9%) took one of the biggest falls of the day despite reporting its largest quarterly profit in ten years for the three months ended 30-Jun-2010. The carrier finished 2Q2010 with a net profit of USD467 million, or USD0.55 per diluted share, compared to a net loss of USD257 million in the previous corresponding period. Operating profit was also up, rising to USD852 million for the quarter, compared to USD1 million in the previous corresponding period.

See related report: Delta reports best operating margin in decade with half billion in profits

Delta attributed the improvement to a rise in international traffic and an increase in Business fares. However, CEO, Richard Anderson, stated the revenue environment is "good, but not great". The airline expects to be solidly profitable for the year, but it plans to retire some of its aircraft this year and does not expect to expand much in 2011.

See related CAPA Profile: Financial Results

United expected to report first quarterly profit since 3Q2007

United Airlines (-0.8%) slipped, despite analysts expecting the carrier to post its first quarterly profit for 2Q2010 since 3Q2007. On average, analysts surveyed by Thomson Reuters expect United to report a profit of USD1.74 per share on USD5.1 billion in revenue. The carrier reported a loss of USD57 million, or USD0.39 per share in 2Q2009.

United will report its results on Tuesday (20-Jul-2010).

Elsewhere, LAN Airlines (+4.3%) shares rose steadily, while Jazz Air Income Fund (+1.6%) was also on the rise.

North & South America selected airlines daily share price movements (% change): 19-Jul-2010

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