Delta posts profit beat on loyal, new customers as rivals battle 737 MAX crisis

By Tracy Rucinski

CHICAGO (Reuters) – Delta Air Lines Inc. on Tuesday posted fourth-quarter profit above Wall Street's forecast, spurred by customers won thanks to 737 MAX cancellations from rival airlines and what CEO Ed Bastian said was a growing preference for the Delta brand.

The airlines owning the Boeing Co 737 MAX together cancel more than 10,000 monthly flights, the plane remaining immobilized after two fatal accidents. Delta does not operate the MAX, which allows it to increase its flight capacity and capture new customers while its counterparts like Southwest Airlines Co have had to shrink.

Delta, Atlanta-based net income increased 8% to $ 1.1 billion in the quarter as of December 31 from a year earlier. Adjusted earnings per share reached $ 1.70, exceeding analysts' expectations for earnings of $ 1.40 per share, according to IBES data from Refinitiv.

Total operating revenues increased 7% to $ 11.4 billion.

"There is no doubt that we are recruiting new customers, but that is not the main driver of our performance," Bastian told Reuters, citing a strong brand and customer loyalty at a time when the demand for air travel continues to increase.

Bastian sees the trend continue in the first quarter with estimated revenue growth of 5% to 7% year-on-year as demand continues to increase "to record levels".

The carrier sees unit costs excluding fuel increase from 2% to 3% in the first quarter and revenues per available seat mile, a closely monitored measure, stable at 2%.

Delta, with 204 million passengers in 2019, generated $ 4.2 million in free cash flow for the year, a number it plans to repeat this year, allowing it to invest more in new technologies to improve the passenger experience.

As for the new planes, Delta is still interested in the new medium-sized plane proposed by Boeing, known as the NMA, despite the late decision of the planner to launch the new plane or not, because it continues to face the fallout from the 737 MAX.

Delta wants to remain a customer of Boeing and Airbus SE, but Bastian said that the longer Boeing takes to decide on the NMA, the fewer options there are for the airline. The Airbus A321XLR and A330 could be alternatives to the new Boeing, he said.

The airline is also still interested in investing around 100 million euros ($ 111.34 million) in the rescue of Italian flagship carrier Alitalia as the Italian government works on a new consortium, Bastian said.

In addition, Delta is working with regulators in South America on antitrust immunity after concluding this month the acquisition of a 20% stake in the LATAM Airlines group, a he declared.

After purchasing LATAM's stake, Delta closed its partnership with Brazil's GOL, a move he said increased Q4 adjusted EPS by 9 cents.

(Report by Tracy Rucinski; Edition by Muralikumar Anantharaman)

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