Although Delta Air Lines expects to sustain strong pre-tax profits in 2017, cost inflation and continued unit revenue pressure are creating margin compression for the airline. Delta anticipates its operating margin for the year will fall below the 17% to 19% targets it has set for itself over the long term.
Delta acknowledges that in the past its ability to predict a return to positive unit revenue accurately has been dismal; but the company believes it will post a flat unit revenue performance in 1Q2017. The airline also concedes that when it set long-term margin targets earlier in 2016 it believed unit revenues would rebound faster than has ultimately materialised.
The company is characterising 2017 as a transition year in which it is crucial to restore unit revenues in line with cost escalation, concluding that it could be the first year in many that could test the durability of its business model. But Delta is encouraged by positive momentum in many of its markets, and the slowing of yield degradation in the key corporate sector.
As the most conspicuous and largest, Emirates Airline often takes on its shoulders the increasingly difficult task of defending Gulf aviation. Emirates often single handedly represents the Gulf and "Middle East Big 3", in much the same way as Dubai carries regional geopolitics.
Just as there are significant differences between the Big 3 US airlines who have strenuously opposed the Gulf carriers in the US market, so Emirates is fundamentally different from its peers: it is longer established, has a larger home market and has had a more commercial mandate from the beginning.
Yet Emirates must compete in a market where many others would like a piece of that market. Just as Dubai Inc modelled itself in many ways on Singapore Inc, there are many who would follow the same trail. This does not lead to steady market conditions.
Certainly the policies of US President Trump have hurt aviation and tourism. But Emirates' announcement of a 19% reduction in services to the United States is less about US policies and more about the nature of the market forces that started before Trump was even a serious Presidential contender.