American airline company, Delta Airlines Inc. released on Thursday its fourth quarter and full year 2016 net profits which shows a decline of almost 37% on its fourth quarter earnings; however, the results were still in line with market forecasts.
Fourth quarter adjusted net income was down to $622 million, or $0.82 per share, which met with market analysts forecast equally. Meanwhile, the quarterly total revenue was slightly down from a year ago reports which was from $9.50 billion to $9.46 billion.
According to Delta, the decline in profits was affected by its previous union contract to give a 30% raise to 13,000 of its pilots by 2019 totaling almost $475 million, which took effect late last year.
Meanwhile, the adjusted fuel expenses of the company were down to $240 million from the reports in the same period last 2015, mostly affected by the 12% increase in the market prices. Delta has adjusted its fuel price by $1.60 per gallon for the December quarter.
“As we move into 2017, we are seeing our unit revenues turn positive which should return the company to margin expansion by the back half of the year,” said Delta CEO Ed Bastian. He then added, “This will allow us to produce the solid returns and cash flows that investors rely upon from Delta.”
Included on the released report from the airlines company was a forecast for the first quarter of 2017, with a forecast of passenger unit increase 0% to 2% for the quarter, and an 11% to 13% climb for the operating margin. The company’s salary expenses also jumped by 30% or $656 million higher compared to the same period from 2015.
Delta has stated that it already expects great pressure on margins for the first quarter of 2017 due to the change of pacing in the unit revenue that is unlike to match the cost impact of higher fuel prices and employee wage increases. According to the airline, the marginal pressure is likely to increase during the first quarter and increase even more at the beginning of the second quarter of the year.
“We will remain conservative and keep our capacity growth in check until we see a further firming of these revenue trends in the near-term and longer-term, a return to our 17-19% operating margin target,” Bastian said.
Due to the slightly disappointing reports, Delta shares were down by $1.50 per share, or 3% at $49.94 during Thursday’s trading session.
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