The FINANCIAL — Delta Air Lines reported financial results for the September quarter 2018.Adjusted pre-tax income for the September quarter 2018 was $1.6 billion, and adjusted earnings per share were $1.80, at the high end of guidance. Adjusted earnings per share were up 16 percent compared to the prior year quarter, driven by revenue momentum, tax reform benefits and a four percent lower share count. Results reflect a $30 million negative impact from Hurricane Florence.
Delta’s adjusted operating revenue of $11.8 billion for the September quarter improved eight percent, or $912 million versus the prior year. This quarterly revenue result marks a record for the company, driven by improvements across Delta’s business, including a nearly 20 percent increase in premium product ticket revenues and double-digit percentage increases in cargo, loyalty and Maintenance, Repair and Overhaul revenue.
Total unit revenues excluding refinery sales (TRASM) increased 4.3 percent during the period driven by strong demand and improving yields. Foreign exchange benefit of approximately half a point was offset by the impact of Hurricane Florence.
December Quarter 2018
Despite an expected 30 percent increase in fuel price, Delta expects pre-tax margins to stabilize in the December quarter driven by continued top-line growth and improving cost performance.
Total adjusted operating expenses for the September quarter increased $1.0 billion versus the prior year quarter, with more than half of the increase driven by higher fuel prices.
CASM-Ex was flat for the September quarter 2018 compared to the prior year period, a three-point improvement from the June quarter. Efficiency gains successfully offset cost pressures from higher revenue-related costs and product and employee investments.
Adjusted fuel expense increased $655 million, or 35 percent, relative to September quarter 2017. Delta’s adjusted fuel price per gallon for the September quarter was $2.22, which includes $12 million of benefit from the refinery.
Adjusted non-operating expense improved by $30 million versus the prior year, driven primarily by pension expense favorability. The company expects 2018 full-year adjusted non-operating expense to be approximately $300 million, representing a $160 million improvement over prior year due to favorable interest and pension expenses, offsetting reduced partner earnings due to higher fuel.
Adjusted tax expense declined $221 million for the September quarter primarily due to the reduction in Delta’s book tax rate from 34 percent to 23 percent.
Cash Flow and Shareholder Returns
Delta generated $1.5 billion of operating cash flow and $655 million of free cash flow during the quarter, after the investment of $865 million primarily for aircraft purchases and modifications.
For the September quarter, Delta returned $566 million to shareholders, comprised of $325 million of share repurchases and $241 million in dividends.