Delta Air Lines Inc. on Wednesday said it would reduce international capacity by 3% this winter to buffer the negative impact of the strong dollar and low energy prices.
The Atlanta-based airline announced its plans along with its March-quarter results. For the first quarter, Delta reported earnings that more than tripled, beating analyst expectations, boosted by lower fuel prices. Revenue increased 5%.
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Shares of Delta, up 35% over the past year, slid 8 cents in premarket trading.
Chief Executive Richard Anderson said that this was the strongest March quarter, both operationally and financially, in Delta's history.
"While the strong dollar is creating headwinds with international revenues, it also contributes to the lower fuel prices, which will offset those headwinds with over $2 billion in fuel savings this year," he added.
Average fuel price was $2.29 during the March quarter, lower than the $2.30 to $2.40 range expected for the current quarter.
By putting more seats on planes and using larger aircraft on some routes, Delta and other big airlines have been pushing up their capacity modestly. However, Delta will now adjust by reducing capacity in markets most affected by the strong dollar. This means a suspension of service to Moscow and a 15% to 20% reduction in service in areas such as Japan, Africa, India and the Middle East.
The adjustment should result in flat system capacity for the December quarter, the company said.
The strong dollar shaved off about $105 million in sales during the quarter, which also was hurt by winter storms. Capacity increased 5% as traffic increased 3.6%. Passenger revenue grew 3%, though unit revenue fell 1.7%, again because of currency pressures. Load factor was 87.1%, down from 82.7% a year earlier.
Overall, Delta posted a profit of $746 million, or 90 cents a share, up from $213 million, or 25 cents a share, a year earlier. Excluding special items, such as tax benefits, per-share earnings were 45 cents.
Sales increased to $9.39 billion from $8.92 billion.
Analysts had predicted per-share earnings of 44 cents and revenue of $9.4 billion, according to Thomson Reuters
For the current quarter, the company expects an operating margin of 16% to 18% and system capacity to rise 3%.
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