The results from Delta, the world's third-biggest airline company, produced a strong opening to the industry's results for the busy April-to-June quarter. American and United are scheduled to report second-quarter figures on Thursday, and analysts expect the biggest U.S. carriers to post large profits.
Delta said it benefited from gains in corporate contracts and domestic traffic. Like other airlines, Delta has been adding flights cautiously and instead is cramming more passengers on each plane. The average flight was 86.3 per cent full, a figure that would have seemed impossible not long ago.
By limiting seats or capacity, airlines can keep fares high. CEO Richard Anderson said Delta would continue its "disciplined approach" to adding new flights.
"This discipline continues to be a key driver of our success, as we will post record results for 2014," Anderson said on a conference call with analysts. "We see a good demand environment, combined with modest capacity increases that will result in solid (revenue) growth."
The average fare per mile climbed 3.8 per cent, and Delta also collected more from what it calls merchandising, such as charging extra fees for a roomier seat and for priority boarding.
The company's operating margin climbed to 15.1 per cent, and it predicted margins of 15 per cent to 17 per cent in the third quarter.
For the third quarter, however, Delta predicted slower growth in so-called unit revenue — the amount of money taken in for every seat flown one mile. That figure is closely watched in the airline business, and it jumped 5.6 per cent in the June quarter. Delta predicted an increase of between 2 per cent and 4 per cent for the July-to-September period, compared with the same months in 2013.
J.P. Morgan analyst Jamie Baker said that while the unit-revenue forecast might disappoint some investors, Delta's overall guidance including margin was strong.
S&P Capital IQ analyst Jim Corridore slightly raised his estimates of per-share earnings in 2014 and 2015. He praised the company for reducing debt, buying back shares and investing in the fleet, and said it would likely produce better returns than other airlines.
For the second quarter, the Atlanta-based company said that net income increased to $801 million, or 94 cents per share, from $685 million, or 80 cents per share, in the same quarter a year ago.
Earnings, adjusted for one-time gains and costs, were $1.04 per share. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.03 per share.
The company said revenue climbed 9.4 per cent to $10.62 billion from $9.71 billion in the same quarter a year ago, and beat Wall Street forecasts. Analysts expected $10.59 billion, according to Zacks.
Fuel spending dropped 6 per cent to $2.43 billion, offsetting a 6 per cent gain in labour costs to $2.05 billion.
In afternoon trading, the shares were up $1.05, or 2.8 per cent, to $38.73. Through Tuesday, they had gained 37 per cent on the year, while the Standard & Poor's 500 index had increased 7.3 per cent.