Category Archives: Delta Air Lines

Delta and China Eastern solidify their strategic partnership, Delta to acquire a 3.55% share

Delta Air Lines (Atlanta) and China Eastern Airlines (Shanghai) today signed an agreement to expand their partnership and better connect Delta’s global network with China Eastern, one of the leading airlines in China. The agreement will include a $450 million investment by Delta to acquire a 3.55 percent stake in China Eastern.

Delta continued:

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This move marks a significant step in the airlines’ collaboration and partnership that will allow Delta and China Eastern to compete more effectively on routes between the U.S. and China, provide more travel options for customers in both countries and make joint investments in the customer experience.

“The execution of the Subscription Agreement and the launching of commercial cooperation plan by China Eastern and Delta indicate significant strategic moves of China Eastern to comprehensively reform further, actively explore and develop mixed ownership economy, and actively promote globalized development,” said Shaoyong Liu, China Eastern CEO. “The cooperation of the parties is based on a global vision and joint strategic blueprint. The parties will take advantage of their respective route networks, flight services, relevant businesses and advantageous resources to fully connect the world’s two top economies as well as two top air transportation markets. The parties wish, through excellent operation and international cooperation, to optimize customer experience, enhance the parties’ global competitiveness and promotes the development and revenue growth of both parties.”

“Delta’s relationship with China Eastern is long-standing. We share a vision that will create the most profitable, enduring franchise between the U.S. and China, with world-class customer service,” said Richard Anderson, Delta CEO. “For the past three years, Delta has welcomed members of the China Eastern team at our headquarters for sharing best practices and work study opportunities. We have learned much from one another already and look forward to deepening our already effective partnership.”

China Eastern 2014 logo (LRW)

China Eastern, with its wholly owned subsidiary Shanghai Airlines, and Delta currently operate codeshare flights on 30 domestic routes in the U.S., 43 domestic routes in China and seven trans-Pacific routes between China and the U.S. China Eastern serves the three largest U.S. markets, with four nonstop flights from Shanghai and Delta serves the three largest cities in China with six daily non-stop flights from the U.S.

  • China Eastern and Delta continue to strengthen cooperation and support each other in the China-U.S. market through greater access to each other’s networks and an improved customer experience. Among recent improvements:
  • China Eastern and Delta have expanded their joint China-U.S. offering – further cementing their position in the largest market to/from Shanghai – with Delta’s recent addition of new Los Angeles to Shanghai service.
  • Delta’s recent move to Terminal 1 at Shanghai’s Pudong Airport to co-locate with China Eastern and Shanghai Airlines has resulted in more convenient connections and a seamless airport and baggage experience for customers.

Newly developed joint corporate sales provide more competitive products to customers in China and the U.S.

Equity investment

As part of the enhanced strategic partnership, China Eastern and Delta entered into a conditional subscription agreement where Delta will invest $450 million in China Eastern’s H-shares, which trade on the Hong Kong Stock Exchange. The investment equals approximately 10 percent of China Eastern H shares and [3.55] percent of the total shares of China Eastern. Delta also will be entitled to an observer seat on the China Eastern board of directors. The agreement is conditioned upon achievement of a final marketing agreement and approval by each carrier’s board of directors.

China Eastern in the U.S.

China Eastern will operate 35 weekly departures to 4 destinations in US from Shanghai, 2 flights a day to Los Angeles, daily to New York, San Francisco and Hawaii, also 3 flights a week from NanJing to Los Angeles. China Eastern operates Luxurious new 777-300ERs on routes between China and North America, which will be a major market for China Eastern over the future years. China Eastern plans to open new routes to North America and also boost frequencies on existing routes.

Delta in China

Delta will operate 28 weekly departures to Shanghai this summer. Delta also offers daily service to China’s capital, Beijing, from Seattle and Detroit and to Hong Kong from Seattle. Delta has grown its China network by nearly three times in the past five years.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. China Eastern’s new Boeing 777-39P ER B-2002 (msn 43288) climbs away from Los Angeles International Airport (LAX).

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Delta to extend the seasonal Boston-Paris (CDG) route to year-round service

Delta Air Lines (Atlanta) will extend its seasonal daily nonstop service between Paris-Charles de Gaulle and Boston Logan International Airport to a year-round operation, beginning on October 25.

The route will be operated in conjunction with joint venture partner Air France (Paris) and will become Delta’s 10th U.S. gateway offered year-round from Paris. Delta will operate the service on a Boeing 757-200 aircraft.

Copyright Photo: Jay Selman/AirlinersGallery.com. Boeing 757-232 N660DL (msn 24422) approaches the runway at Las Vegas.

Delta Air Lines aircraft slide show: AG Airline Slide Show

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Delta’s CEO Richard Anderson: The 40 Boeing 737-900 ERs and 20 Embraer E190s will be cancelled

Delta Air Lines (Atlanta) management team held a conference call yesterday, mainly with the analysts and representatives of the media, after posting a record second quarter profit, beating all Wall Street forecasts.

In the conference call, CEO Richard Anderson when asked about the rejection of the proposed contract by the pilots, stated, without elaborating further, the 40 Boeing 737-900 ERs and 20 Embraer ERJ 190s on order “will be cancelled”. The company had tied these two orders with the ratification of the new pilot contract.

The comment could be considered posturing by some observers, intended as a new salvo to the pilots for the next round of contract negotiations.

The pilots, represented by ALPA, voted nearly two-to-one against the proposed contract. Both sides will now have about six months to further negotiate new terms in which both sides can agree.

ALPA has not formally responded to the comments.

The Embraers would have represented a new lower level of mainline flying.

Read more from Bloomberg Business: CLICK HERE

Copyright Photo: Brian McDonough/AirlinersGallery.com. Boeing 737-932 ER N817DN (msn 31928) banks on the river approach to the runway at Washington’s Ronald Reagan National Airport.

Delta Air Lines aircraft slide show: AG Airline Slide Show

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Delta reports adjusted earnings of $1 billion in the second quarter, up 22%, expects capacity to decrease 3% in the 3Q

Delta Air Lines (Atlanta) today reported its best second quarter financial results in its history:

Delta Air Lines today reported financial results for the second quarter (June) 2015 quarter, including adjusted net income of $1.0 billion or $1.27 per diluted share, up 22% from the same quarter in 2014.

“Delta’s record results have allowed the company to invest in its employees through higher wage rates and profit sharing; improve the experience for our customers through new aircraft and innovative partnerships with global carriers; and uniquely deliver value for our shareholders by accelerating our capital returns while also paying down debt,” said Richard Anderson, Delta’s chief executive officer. “We have more work and opportunity ahead of us on all of these fronts as we continue to execute on our long-term plan.”

Anderson continued, “Our significant fuel savings in the September quarter should allow us to produce another record quarter with more than 30% EPS growth, a 19-21% operating margin and $1.9 billion of operating cash flow.”

Delta 2Q Graph

Revenue Environment

Delta’s operating revenue for the June quarter increased 1%, despite $160 million in foreign currency pressures which reduced unit revenues by approximately 2 points. Passenger unit revenues declined 4.6% on a 3.9% decline in yields.

Delta saw solid progress with several of its revenue initiatives, including Branded Fares, which increased passenger revenues by $56 million, and its enhanced agreement with American Express, which produced an incremental $60 million in revenue.

“Our commercial initiatives continue to gain traction in the marketplace and we will produce summer margins in excess of any achieved in our history,” said Ed Bastian, Delta’s president. “However, unit revenue growth is an important component of our long-term plan to expand margins. We continue to project flat system capacity growth for the fourth quarter of 2015 – a level in line with current demand expectations, which should put the business on the right trajectory to stem the erosion in unit revenues by the end of the year.”

Investment Strengthens Partnership and Expands Global Reach

Strengthening its existing partnership with Gol, Delta recently agreed to purchase up to $56 million in preferred shares as part of a larger rights offering by the Brazilian carrier. In addition to the equity, Delta will guarantee up to $300 million in borrowings by Gol under a term loan with third-party lenders. Delta’s guarantee will be secured by Gol’s interest in SMILES, Gol’s publicly-traded loyalty program. Delta and Gol have also agreed to extend their exclusive commercial agreement for flights between the United States and Brazil, the largest aviation market in Latin America. This transaction is subject to normal closing conditions, including regulatory approvals.

Cost Performance

Adjusted fuel expense2 declined over $463 million compared to the same period in 2014, as 39% lower market fuel prices and a $77 million increase in profit at the refinery offset nearly $600 million in settled hedge losses. For the remainder of 2015, Delta expects its fuel expense to be $1.90 – $2.00 per gallon, a significant reduction to the $2.65 per gallon it realized in the first six months of the year.

CASM-Ex3 decreased 0.8% for the June quarter on a year-over-year basis, with foreign exchange and the benefits of Delta’s domestic refleeting and other cost initiatives offsetting the company’s investments in its employees, products and operations. This marks the eighth consecutive quarter of CASM growth below 2%, in line with the company’s long-term goals.

Delta’s debt reduction initiative continued to improve the company’s interest expense, producing $46 million in interest savings for the quarter compared to the same period in 2014.

“Because of the momentum we’ve built with our cost reduction initiatives, we expect to post our ninth consecutive quarter of sub-2% unit cost growth in September,” said Paul Jacobson, Delta’s chief financial officer. “Cost efficiency has contributed to the record results that allowed us to return $1 billion to shareholders in the June quarter while investing in our employees and customer experience.”

Cash Flow, Shareholder Returns, and Adjusted Net Debt

Delta generated $2.5 billion of adjusted operating cash flow and $1.6 billion of free cash flow during the quarter. The company used this strong cash generation to reinvest nearly $1 billion back into the business, primarily for aircraft purchases. The company returned $1.0 billion to its owners through $72 million of dividends and $925 million of share repurchases, while also strengthening its balance sheet by reducing its adjusted net debt to $7.1 billion.

September 2015 Quarter Guidance

Following are Delta’s projections for the September 2015 quarter:

3Q15 Forecast

Unit Revenue (compared to 3Q14)

(4.5%) – (6.5%)

Operating margin

19% – 21%

Fuel price, including taxes, settled hedges and refinery impact

$1.90-$1.95

CASM – Ex (compared to 3Q14)

Flat

System capacity (compared to 3Q14)

~3%

Special Items

Special items, net of taxes, in the June 2015 quarter totaled $458 million, including:

$454 million for mark-to-market adjustments and settlements on fuel hedges;

a $16 million charge for fleet and other items, primarily associated with Delta’s domestic fleet restructuring initiative; and

$20 million for mark-to-market adjustments on hedges owned by Virgin Atlantic.
Special items, net of taxes, in the June 2014 quarter totaled $88 million, including:

a $69 million charge for debt extinguishment associated with Delta’s debt reduction initiative; and

a $20 million charge associated with Delta’s domestic fleet restructuring.

Top Copyright Photo: Fred Freketic/AirlinersGallery.com. Delta has been introducing the former AirTran Airways Boeing 717s around the country including the West Coast. Boeing 717-2BD N966AT (msn 55027) departs from the New York (JFK) hub. All 717s are leased from Southwest Airlines.

Delta Air Lines aircraft slide show (current livery):

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Delta to lead off the 2Q airline sector earnings reports today

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Delta Air Lines (Atlanta) today leads off all U.S. airlines with the financial results for the second quarter. Lately the U.S. airline sector has been hit hard on Wall Street over growing concerns about overcapacity and “discipline”. Many investors will be keying on Delta’s announcement today.

Delta is webcasting its conference call and will be discussing its second quarter (“June Quarter”) results at 1000 (10 am) EDT with CEO Richard Anderson, President Ed Bastian and CFO Paul Jacobson.

To listen you must register: CLICK HERE

We will have the full 2Q financial details when they are released.

Other known airline and manufacturing reporting dates (others are welcome):

Boeing July 22

Alaska Air Group July 23

JetBlue Airways July 23

Southwest Airlines July 23

United Airlines July 23

Spirit Airlines July 24

American Airlines Group July 24

Ryanair July 27

UPS July 28

Hawaiian Airlines July 28

Gol and Delta Air Lines strengthen their strategic alliance

Gol Linhas Aereas Inteligentes (Sao Paulo) has agreed to enter into several strategic transactions with the Constantino Family, Gol’s controlling shareholder, and Delta Air Lines (Atlanta) to strengthen the airlines’ strategic alliance and enhance Gol’s financial position and liquidity.

The airline continued;

Gol logo-2

As part of the agreement, Gol’s controlling shareholder will invest up to $90 million (US) in newly issued preferred shares of Gol and Delta will invest up to $56 million in newly issued preferred shares of Gol. Delta also will guarantee a term loan to be entered into by Gol with third party lenders of up to $300 million. In connection with these transactions, Gol and Delta will extend their commercial cooperation arrangements.

The consummation of each of the strategic transactions is subject to the execution and delivery of definitive documentation and customary closing conditions, including receipt of required regulatory approvals.

Copyright Photo: Rodrigo Cozzato/AirlinersGallery.com. Gol’s Boeing 737-76N PR-GOH (msn 32440) departs from Sao Paulo (Guarulhos).

Gol aircraft slide show: AG Airline Slide Show

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Delta to operate the Airbus A330-300 from Atlanta to Dublin

Delta Air Lines (Atlanta) is planning to introduce the Airbus A330-300 (replacing a Boeing 767-300) on the Atlanta – Dublin route on five days a week starting on May 26, 2016 per Airline Route.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A330-323 N813NW (msn 799) departs from Tokyo (Narita).

Delta Air Lines aircraft slide show (current livery): AG Airline Slide Show

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