(Updates shares, adds executive and analyst comments, Southwest
By Jeffrey Dastin
Sept 7 U.S. airline stocks jumped on Wednesday
after Delta Air Lines Inc said sales trends were
improving and Southwest Airlines Co said it would slow
its breakneck growth of flights in 2017, giving investors hope
that the industry could recover from a revenue rut.
Delta Chief Financial Officer Paul Jacobson said on a
conference call with investors that the airline expected a $150
million drop in pretax income due to a power outage that shut
down computer systems in August. The incident forced Delta to
cancel 2,300 flights over three days and highlighted airlines'
fragile technology infrastructure.
Delta, the No. 2 U.S. airline by passenger traffic, now
expects an operating profit margin of 18 percent to 19 percent
in the third quarter, compared with a prior outlook of 19
percent to 21 percent. However, Jacobson said Delta's underlying
performance was on track.
"This has been a challenging quarter... but we do have a lot
of momentum," Jacobson said. "We see a lot of signs, reasons to
The Atlanta-based airline has not canceled a single flight
in the past 10 days, Jacobson said. Domestic unit revenue, a
closely watched measure that compares sales to flight capacity,
also showed "solid improvement" as fall schedules took effect,
the company said in a regulatory filing.
The airline said capacity growth in the United States, its
biggest market, would slow to 2.5 percent in the fourth quarter
from 5.7 percent in the first half of the year. The fewer seats
airlines offer, the more likely they are to avoid deep discounts
to fill them.
For months, new flights as well as attacks from Paris to
Istanbul have forced airlines to sell cheaper tickets, hurting
their unit revenue.
Southwest, which has ramped up flights from Dallas and
contributed to rivals' woes, on Wednesday said it expected
capacity to rise less than 4 percent in 2017, compared with
anticipated growth of 5 percent to 6 percent this year.
"The data point should ease some concerns that elevated
growth from Southwest next year could further pressure domestic
pricing trends," Stifel analyst Joseph DeNardi said in a
Delta rose nearly 5 percent in early afternoon trading,
while Southwest was up more than 4 percent.
Shares of American Airlines Group Inc and United
Continental Holdings Inc, which compete head-to-head
with Southwest on many routes, each rose more than 5 percent.
(Reporting by Jeffrey Dastin in New York; Editing by Lisa Von
Ahn and Joseph White)