Delta expects margins to contract in 2017 as revenue improvement lags behind cost increases

Delta Air Lines stated (06-Mar-2017) margins are likely to contract in 2017 as the pace of revenue improvement lags behind cost increases. The carrier expects the greatest pressure to occur in the Mar-2017 quarter, with a return to margin expansion in 2H2017. Delta anticipates up to USD6 billion in pretax profits in 2017, with a target returning at least 70% free cash flow to shareholders. The carrier projects a 10% to 11% operating margin for 1Q2017, as it works through headwinds from higher costs and recovering unit revenues. Market fuel prices are tracking up to 55% for 1Q2017, which is expected to be the greatest year-on-year increase in 2017. Unit revenues are tracking at the low-end of Delta's original guidance range, given a more moderate pace of improvement in Feb-2017 than initially anticipated. Delta continues to expect unit revenue trends to improve through 2017. [more - original PR]