Delta's 2016 Earings
 

Summary

Continued low oil prices are expected to help Delta grow earnings 24% in 2016.

While revenue per passenger has declined year over year, the company is taking steps to limit capacity growth in order to improve PRASM and margin growth.

Delta trades at a forward P/E of 9 compared to peers like Southwest and JetBlue that trade at 11-12 times forward earnings.

Cuts in overseas markets should help boost margins in 2016.

Passenger load factors for Delta are some of the best in the industry.

Transportation stocks in general have had a rough year in 2015 with the Dow Jones Transport Index down over 15% as we prepare to close out the year. Airlines have performed modestly better as a whole, but it's been hit and miss. Stocks like JetBlue Airways (NASDAQ:JBLU) and Alaska Air Group (NYSE:ALK) are both up over 40% while laggards like United Continental (NYSE:UAL) and American Airlines Group (NASDAQ:AAL) are down double digits.

Delta Air Lines (NYSE:DAL) has had a decent year thus far in 2015 returning shareholder just over 5%. There are a number of factors in place, however, that suggest that Delta could be in for an even bigger year in 2016. Oil prices, revenues per passenger, foreign exchange rates and valuations will all factor into the stock's performance in the coming year but I like the way Delta is currently positioned to take advantage of some of these trends. For the reasons I'm about to discuss, I think Delta could be a top choice for 2016.

Continued low oil prices boosting the bottom line

Oil prices are near lows last seen in 2008 as OPEC countries continue to pledge that they'll maximize production in the face of crude oversupplies. With the Fed likely to raise interest rates at any moment, a lot of pressure will continue to weigh on crude prices likely keeping them in the mid $30 range until something - a pullback in production or an increase in oil demand or both - changes.

Low oil prices are damaging to energy companies but are welcome news for airlines. In the 3rd quarter of 2015, Delta reported net income of $1.3 billion versus $0.4 billion in the same quarter a year ago. At the same time, fuel expense fell to $1.1 billion from $1.8 billion year over year. I'd expect this trend to continue at least through the first half of 2016 as oil supply and demand remains out of whack, but this assumption may need to be revisited in the second half of the year if production levels change.

Taking steps to maximize revenue per passenger

Passenger revenue per available seat mile (PRASM) remains one of the go-to metrics to determine how well an airline is functioning. The airlines lately have been issuing cautious forecasts with Delta being no exception. Delta reported a 5% decline in PRASM in Q3 on 3% capacity group and forecasted a 2.5-4.5% drop in the Q4. One encouraging sign of a PRASM turnaround is that Delta already announced that it expects to come in on the high end of Q4 expectations.

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2015 PRASM came down as capacities were rising. Therefore, Delta has set a goal of raising capacity only in the 0-2% range in 2016 in order to turn PRASM positive again. Passenger revenues showed the biggest decreases in its overseas markets, and the company will be making cuts in those areas in order to boost margins and profitability.

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Passenger load factors don't seem to be an issue for Delta as the company reported a figure of 87.3% for the month of August which should further support PRASM growth going forward.

Stock valuation

Airline stocks in general sport lower valuations than the broader market but Delta seems undervalued even by these modest expectations.

Delta carries a forward P/E of just under 9 based on 2016 earnings. Delta's earnings are also expected to grow around 24% in 2016 compared to 2015 which suggests that some multiple expansion could be in order. Southwest, JetBlue and Alaska Air all have forward P/Es in the 11-12 range. A 20% multiple expansion might not be in the cards for Delta but it could begin approaching the valuations of its peers.

Conclusion

There are a lot of moving parts in play for Delta, but I like where the company sits right now. Bets could be off if oil prices begin to unexpectedly rise again. Foreign exchange could be another headwind although the dollar seems to have stabilized lately.

The company seems to be taking logical steps to improve PRASM and with valuations low, earnings rising, and passenger loads strong, Delta's stock could be a strong performer in 2016.

IMO Delta will easily earn $9 Billion plus in 2016 with a forward P/E of 12 or more.

Didn't our Rocket Surgeon C44 FO rep (who used to frequent this forum) tell us:

He's seen the inside data, the sky is falling, airline industry rapidly going down the tubes, so, hurry up and take concessions!

So glad that guy is gone.

Well he's NOT gone yet, not until March!

In the mean time he, and the other 3 ATL Reps (who were all voted out) were able to vote on who is on our negotiating committee and they still give them direction, if we are to believe how they say the process works.

Is it on Tuesday Dec 22, that they are supposed to re-engage with management?

And if by chance there is a TA2 before March 1, these same nit wits will be voting on it again, all YES no doubt!

Here and with the title of the thread I though that Delta would mandate earings as part of the new uniform!!

Do we wear them on the left ear if we voted no for the TA and and on the right if we voted yes?

Hmm... There must be a deeper meaning.. .

Left is right, Right is wrong.... right?:eek::D

..and he ran again as if nothing had happened. It's hard to be that disconnected.

I'm happy to vote no again. I'll live under this contract till they supply a better one. I'm not voting in something worse for a few schillings.

We as pilots are already at red line. The company wants more productivity but there is noting more to give. We already fly too much, guys are collapsing in the seat or a few years after retiring.

There is no more productivity to give yet they want more and then complain when we call in sick.

There is an event horizon where any more productivity becomes less productive. We have crossed that boundary.

It's January and I can't move my days around because of min reserve coverage yet they say my fleet is over staffed. Hmmmm

Something is rotten in Denmark.

Everything about the last TA points to well crafted joint effort between Dalpa and the company to get at least 51% of us to vote yes.

The early TA, no pro con paper, sell job, MEC chairman blow up, shortened period to examine the document, 8% up front. You can go on and on.

If past experience is any indication, we should have an agreement in 8 weeks. Right? That's the way Dalpa and management negotiate. About the time the profit sharing checks arrive.

This time, show us the money.

Diamond earings
 

Not....It is the pathetic irony of alpa incompetence that the single component of our pwa that had any chance of making it the 'richest in history'...... is precisely the feature they couldn't wait to get rid of.....

Capt'n......beautiful assessment of our current state of 'productivity'...... and the expectation and consequence of continually running a powerplant at 100%+

The numbers speak for themselves. The last TA was a pretty big B slap.

Guys are collapsing in the seat? Puhleeze. I am enjoying flying trips that always pay at least 5.15 a day with the ADG, and that also applies to reserves as well as regular line holders. We didn't have that even three years ago. So this year's reserve that 'flew 90 hours" (oh the humanity! and all that) may have only gotten 75 or so...or far less... a few years ago, for the exact same flying.

How about some credit for the good things DALPA has secured, in addition to criticizing the bad things?

How

Fair enough.

First the good:
C2012 was acceptable. The fact that many are willing to fly under it for years if need be lends credence to this. Not great, some will say good, some will say terrible, I say acceptable.

SOT - Has done some very good things.
TOT - Has also done some very good things.

Now the bad:
TA-15 was a huge failure.

Finally the ugly:
The "No holds barred" sales job was indeed very ugly. The MEC Chairman losing his cool and blowing his top. Numerous statements saying "There is nothing more on the table." And lets not forget how we were repeatedly told we would lose the additional 737s and 190s with a no vote.

Some now appear to be trying to re-write history and deny the sales job - not gonna happen. Waaay too much of a video and posting trail.

Now with that said, our team, like em or hate em is in place. Now is the time to support DALPA and maximize our leverage which appears to be steadily growing. :)

Scoop

That's as honest and straight forward a post as possible. I agree with all of what you posted.

I just don't know why all these posts have nothing to do with the title of this thread...which is about jewelry. I actually didn't know Delta had Earings, but what do I know.

Carl

Touche'

Scoop :)

We love earrings here.

https://edrblogs.files.wordpress.com...eodj44sk_f.jpg

I mean we just love them. Love love love them.

Are you saying 70-75 hours for a reserve pilot in 2011 equals 90 credit hours today?

And separately, say a reserve pilot went to 90 hours of credit this month. That puts the ALV at 75 hours at a minimum. If the reserve pilot flew in 2011 3 4-day trips, how many more 4 day trips could they fly in 2011? How about the same pilot today?

eh. I get that, it'd be great to have a kumbaya moment and all, but I'm not going there. Not with what they were trying to commit us too.

It'd be like trying to celebrate your real estate agent for selling your house, like you asked them too, but doing it for 20% below your floor, 30% below the appraised value and 40% below what others were willing to pay for it. There wouldn't be much celebrating even if they gave you some good ideas on how to stage it and fix it up.

I mean, would the flip or flop people do that? No...

http://www.webuyuglyhouses.com/wp-co...op-tv-show.jpg

I bet you didn't read a word I wrote. Including this word... booo! I bet he works out.

the watch is a dead giveaway......

the 'good' things alpa has done? sure thing.....and all that for only $50 million a year?

do you hear that hysterical laughter?.......wonder who is getting royally punked? take a swing by the closest mirror....

I'm saying that just a few years ago reserves could get two day trips that paid FOUR hours (2 hr Duty Period Minimum).

Reserves did not get the Duty Period Average or its predecessor called Variable Minimum. That is why our rotation details have separate lines for regular and reserve.

But now that same trip that could pay a reserve as little as four hours now pays 10.30. Add a few of those together and you see reserves getting to and above the ALV much, much more quickly, for the exact same flying.

Many pilots haven't a clue about any of this, choosing to remain willfully ignorant.

But all means criticize the TA15 rush job and sales job. It should have been criticized. But when guys are critical of all the extra productivity we are giving, let's also acknowledge that we are also getting higher hourly totals than we used to for the exact same flying.

... Reserves getting ADG, something pilots had been petitioning for, literally for decades.
... ADG applies to 30 hr layovers, redeyea, and dh only duty periods

I like to think that DALPA fixed and improved a lot of items on the "margins" of the contract. Now we should be able to concentrate on getting lots of pay, improving... not making worse... sick leave, scope, etc.

I will echo that reserve has gotten MUCH better since I started in 2008 (pay, scheduling rules, etc...). There are still things to work on, but it is livable today.

A 4 hour two day would have been a deadhead out and deadhead back. Not a likely trip.

Now a GS was no credit. But a flying day was 5.15 per day equal to reg pay. That's why so many of the regular and reserve rotation credits were equal. Even with a deadhead leg mid trip it paid the same, im looking at one right now. So I don't know how you could get 90 hours today equaled 75 then for the same flying when on reserve.

As to the poor 90 hour reserve pilot, that was not a good deal. If a reserve flew 3 4-days they would have 63 hours. On a month with a 75 hour ALV, that reserve pilot couldn't fly a typical domestic 3 day or longer trip from that point. If they needed it covered break up the trip or get more people.

Today, that pilot could fly a 5 day trip. Win. For scheduling. Not staffing.

Herk,
That's great. Really is. Many of us haven't been on reserve in 30 years and don't ever plan on being on reserve. So the rest of what Dalpa has been able to get for $50 million a year in dues is inadequate.
In fact, there has been a long history of failure to protect our contract. You know the facts. The list is too long.

Hank

Negative ghostrider. I am talking reserves here, not regular lineholders. A reserve got the Duty Rig, Trip Rig, and Duty Period Minimum (only 2 hrs a day). But until the FAR 117 LOA, he never got the Variable Minimum/Duty Period Average that the regular lineholders got.

So take a 2-day trip, ATL-MCO/layover/MCO-ATL end of trip. That would have paid a regular guy 10.30 but a reserve four. Add a DH-only duty period on either end, and even the regular guy would have only gotten 7.15 (and just 7 hours several years ago when we had VM). Now they both get 10.30. Extreme example? Perhaps, but not in my fleet (717). These types of trips are quite common, which is why perhaps I appreciate the DPA rules and reserve pay features of them so much (I often bid reserve on purpose).

.

You may not realize it but you are making my point. NOW reserves get the same pay as regular lineholders. Try to find a bid package from a few years ago and you will see significant differences. The reason it is so much better is because DALPA negotiated it that way with the FAR 117 SLOA. I just want guys to acknowledge the improvements we have secured, and the same time DALPA better understand that they deserve the criticism for all the TA15 bad stuff.

True...however, while I was not happy with the ability to schedule a reserve to ALV+15, we must acknowledge that in any month where you have vacation, training, etc, you also have your own "personal" reserve guarantee, which may be quite a bit lower than if you were on reserve the entire month. So prior to that, yes a reserve could not be scheduled to exceed the ALV, but he could be scheduled to fly all the way up to it, NOT counting any vacation time he had.

While that does not completely "override" the ability of scheduling to assign to ALV+15, it is better than nothing.

Herkflyr,

By calling many of your fellow pilots "willfully ignorant" is a stretch and sounds like the DALPA sales job on the failed TA.

I was junior in category working under C2012 and I felt like I was worked more than with the previous work rules. Granted, some of the problem was FAR 117, but DALPA shares responsibility there as well. They were involved from day one with it's implementation.

As to your point about ADG for redeyes, the carve out after midnight and shifting of sign in times to just after midnight took care of that - at least in LAX. Trips that were worth 15.45 signing in just before midnight are now worth 10.30 signing in just after midnight. Who would have seen that one coming? Apparently not DALPA. The term "willfully ignorant" applies here.

The big productivity issue that didn't sit well with me was the ALV+15 reserve limit but there were other give backs that made any increase in pay a wash at best.

Please make your DALPA assessment more balanced. They do enough selling for themselves.

This will be my last post on this. I went over a decade without being on reserve. However the company has put so many 4 and 5 day trips in my category (717) that the past few months it has actually been to my advantage to bid reserve on purpose for several reasons.

I realize that most don't want to do that.

I also realize that we still have a lot of improvements to secure to get a strong "yes" endorsement from many pilots--and that is how it should be.

Are you sure you're not confusing the GS pay for Reserves? I remember 2 block hour pay for a GS on an ATL-SAV 2-day with the REG getting 21 hours on a GS. All the rotations I'm looking at have equal REG and RES, but i don't have a bid package showing an out and back.

FWIW, reserve pilots did have a reserve DPA from the end of the bid period and 5.15/day was a part of the formula. If all the pilot did all month until he was full were 2 live leg 2-day trips back and forth to MCO that pilot would have gotten 5.15/day.

10 year old snickering and giggling in the background! I had to point out the subliminal advertising. Sorry, carry on.

it is just unbelievable how a historical record of being wrong, outweighing being right by an order of magnitude...is still, not enough for some to recognize failure for what it is....

and how richly rewarded that failure has been for those responsible.....