Cheap oil fuels daily profit of $16m for Delta in 2015
Ian Taylor
ian.taylor@travelweekly.co.uk
Two of the biggest carriers in the US reported record profits last week, with Delta Air Lines announcing annual pre-tax profits of $5.9 billion and United Airlines earnings of $4.5 billion.
Delta’s profits were up 29%
year on year and showed a 42% increase in the fourth quarter alone. Chief executive Richard Anderson declared the airline’s 2015 performance “a record for Delta on all fronts”. Looking to 2016, he said: “We have a significant opportunity to improve our performance even further. “With over $3 billion in
potential savings from lower fuel prices and numerous commercial, operational and cost initiatives in place, we expect to again perform in the top tier on earnings growth, margins, and cashflows despite global economic challenges.” The oil price hit a 12-year low
at below $30 a barrel last week as stock markets fell globally.
DELTA: The carrier’s profits soared 29% last year on 2014 $5.9bn
Delta’s record pretax profit last year
Delta president Ed Bastian said:
“While we expect international volatility and currency pressures to result in unit revenue declines of 2.5% to 4.5% for the March quarter, we should see over 10 points of margin improvement given our capacity discipline in the face of a more than 50% decline in fuel prices.”
Big-five airlines set up lobbying group
The heads of Europe’s five largest airlines have launched a pan-European lobbying group. A4E (Airlines for Europe), which comprises BA parent
IAG, easyJet, Ryanair, Air France-KLM and Lufthansa, unveiled their campaign calling for reformed regulation on the eve of the EU aviation summit in Amsterdam. The five chief executives, including Carolyn
McCall of easyJet and Willie Walsh of IAG, issued a joint statement saying: “We welcome the European Commission’s Aviation Strategy for a stronger and more competitive European aviation industry. “But we need to act now – large-scale airport monopolies, high charges, taxation and inefficiencies characterise the aviation supply chain.”
The carrier’s chief financial
officer, Paul Jacobson, reported non-fuel costs remained flat in 2015, while Delta invested “significantly in people, products and service”. The airline reported it paid $2.6 billion in dividends to shareholders. Delta owns 49% of Virgin
Atlantic, with which it operates a transatlantic joint venture. United’s 2015 annual profit
of $4.5 billion, excluding special items, was up from $1.13 billion for 2014. The carrier’s annual revenue was down 2.7% year on year, but its fuel costs for 2015 were 36% lower.
Lobbyists urge PM to halve APD across UK
A Fair Tax on Flying, the industry coalition against Air Passenger Duty (APD), launched a campaign last week urging the government to halve the tax across the UK. Twenty MPs have signed a Commons motion
backing the demand for ‘A Fair Tax on Flying for the Whole Country’ ahead of the Budget on March 16. The Scottish government has pledged to halve APD
north of the border as soon as tax-raising powers are devolved. Abta head of public affairs Stephen D’Alfonso said:
“Surely the government does not consider it fair for a family from Falmouth to pay double the amount of APD on their holiday as a family from Falkirk? “APD should not be a postcode lottery.”
ANDREW SHELTON managing director,Cheapflights 28 January 2016
travelweekly.co.uk 111
COMMENT
Airlines should stop living life on the hedge and take initiative on fuel surcharges
The price of Brent crude oil has fallen below $30 a barrel, a 12-year low, and commentators have been quick to point to the discrepancy between what we’re paying at the garage and the fuel surcharges that form part of the price of airline tickets.
Hedging, where airlines buy oil based on long-term price forecasts, protects customers from the worst fluctuations in price. Everyone understands airlines
need to make a profit; that is where investment in customer experience, improvements in technology and advancements in environmentally-friendly fuels come from.
But when the good times are
here, parties on both sides of the transaction should feel the benefit.
Hedging is a valid defence, but only for so long. If the fuel price stays low long-term, airlines will find themselves under pressure to act accordingly. Surely it is better to do so as part of a proactive, customer value-focused strategy than because you’ve been ‘forced’ to? Being on the front foot will not only help airlines win over customers, but stimulate growth and encourage trade.
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