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Delta Down on Dismal Load Factor Performance in November

Zacks Equity Research

Shares of Delta Air Lines DAL shed almost 2% of their value on Dec 3, 2019, to close the trading session at $55.62. The trigger for the share price depreciation was its November 2019 traffic report, wherein load factor (% of seats filled by passengers) declined as traffic growth was outpaced by capacity expansion in the month. The metric was hurt by weakness in domestic and Pacific markets.

Traffic Report

Consolidated traffic, measured in revenue passenger miles (RPMs), increased 1.8% year over year to 17.14 billion. Notably, the Latin American market registered the highest increase of 3.4%. Traffic in the Atlantic and Pacific markets increased 2.8% and 1%, respectively. Meanwhile, the domestic traffic increased 1.5%.

Consolidated capacity, measured in available seat miles (ASMs), expanded 4% to 20.41 billion on a year-over-year basis. The increase in domestic capacity was 4.9%. On the international front, capacity rose 2.3%, 1.5% and 3.8%, in the Latin American, Atlantic and Pacific markets, respectively.

Consolidated load factor decreased 180 basis points to 84%. Domestic load factor decreased 280 basis points to 84.2%. On the international front, the metric increased 90 and 110 basis points to 85.3% and 84.1% in the Latin American and Atlantic markets, respectively. In the Pacific market, load factor declined 230 basis points to 81.2%.

Additionally, the carrier recorded an on-time performance (mainline) of 89.6% and a completion factor (mainline) of 99.93%. Delta’s passenger count rose 1.7% to 15.73 million in the month. However, cargo ton miles declined 4.1% in the same month on a year-over-year basis.

In the first eleven months of 2019, Delta registered consolidated RPMs of 218.56 billion (up 5.3%) and ASMs of 253.42 billion (up 4.5%). As a result, load factor improved 60 bps to 86.2% in the January-November period.

Price Performance

Delta has not been performing impressively at the moment, declining 3.3% over the past month.

The disappointing traffic report is a further negative for the stock.

Zacks Rank & Key Picks

Delta carries a Zacks Rank #3 (Hold). Better-ranked airline stocks are Allegiant Travel Company ALGT, Hawaiian Holdings HA and Alaska Air Group ALK. While Allegiant sports a Zacks Rank #1 (Strong Buy), Hawaiian Holdings and Alaska Air carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Allegiant, Hawaiian Holdings and Alaska Air have gained 68.4%, 10.1% and 9.5%, respectively, so far this year.

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