Volotea (Barcelona) for next summer season is adding 15 new routes according to Airline Route:

Bastia – Caen twice weekly (April 12)

Bordeaux – Brest twice weekly (April 17)

Bordeaux – Corfu weekly (April 19)

Bordeaux – Dubrovnik  weekly (April 18)

Bordeaux – Prague twice weekly (April 17)

Bordeaux – Toulon twice weekly (June 29)

Lille – Figari twice weekly (April 26)

Lille – Biarritz twice weekly (April 27)

Naples – Irakleion weekly (June 30)

Strasbourg – Olbia weekly (April 24)

Strasbourg – Figari twice weekly (April 25)

Strasbourg – Venice twice weekly (April 27)

Toulouse – Figari twice weekly (April 25)

Toulouse – Palermo weekly flight (starting April 10)

Toulouse – Palma Mallorca twice weekly (April 11)

Top Copyright Photo: Paul Bannwarth/AirlinersGallery.com. Boeing 717-2BL EI-FBM (msn 55192) taxies at Nantes, France.

Volotea: 

Current routes from Venice:

Delta Air Lines (Atlanta) continues to expand Boeing 717 operations as more aircraft are released from AirTran Airways. As previously reported, AirTran will operate its last flight on December 28.

Delta will introduce the 717 to the Minneapolis/St. Paul hub starting on January 6, 2015 with a route to Charlotte. Kansas City, Madison and Philadelphia will be added on February 13 followed by Detroit on March 2 per Airline Route.

Delta is also assigning the 717 to two new routes from the Atlanta hub to both Georgetown (December 20) and Nassau (January 12) in the Bahamas.

Copyright Photo: Brian McDonough/AirlinersGallery.com. Boeing 717-231 N929AT (msn 55075) arrives at Washington (Dulles).

Delta Aircraft Slide Show (current livery): 

Southwest Airlines (Dallas) reached a milestone in the final stage of its integration of wholly owned subsidiary AirTran Airways by launching Southwest-branded flights to Punta Cana, Dominican Republic, and Mexico City. All international flights between seven destinations outside the United States and the carrier’s nine U.S. gateway cities are now flown by Southwest.

Southwest has completed the integration of booking and frequent flyer functions into Southwest.com, referring all Customers who visit airtran.com to Southwest.com. All bookings for remaining flights on AirTran Airways flown through December 28, 2014, will now be made through Southwest.com and all of AirTran’s A+ Rewards Members have Rapid Rewards accounts in the Southwest Airlines Rapid Rewards® frequent flyer program, which offers unlimited reward seats, no blackout dates, and points that don’t expire. (Flight or Partner earning activity required every 24 months. Benefits apply to points transactions. All Rapid Rewards rules and regulations apply.)

The expansion of service at Dallas Love Field continued with the launch of additional eight nonstop destinations, following the launch of nonstop itineraries to seven cities that began last month. New flights began yesterday (November 2) between Dallas (Love Field) and Atlanta, Ft. Lauderdale/Hollywood, Nashville, New York (LaGuardia), Phoenix, Orange County/Santa Ana, San Diego, and Tampa.

Additional nonstop service between the San Francisco Bay Area and North Texas begins after the first of next year when new flights between Dallas Love Field and both San Francisco (SFO) and Oakland (OAK) begin on January 6, 2015.

Copyright Photo: Brian McDonough/AirlinersGallery.com. The sun will be setting next month for AirTran Airways when the last Boeing 717 flight is operated between Atlanta and Tampa on December 28. All of the AirTran 717s will be leased to Delta. Boeing 717-231 N985AT (msn 55090) banks on its final turn on the river approach to Washington’s Reagan National Airport (DCA).

AirTran Airways: 

Southwest Airlines: 

Video: A first for Southwest, a wedding at 32,000 feet:

Scandinavian Airlines-SAS (Stockholm) issued its year-end financial report for the period ending on October 30, 2014. The company continues to reduce its losses. The Group report a SEK (Swedish Krona) 719 million ($92.4 million) full-year net loss.

The comments by the CEO:

As part of its cost reduction plan, SAS stated the following in its financial report about Blue1 (Helsinki):

AirTran Airways (Orlando), as planned ended its operations last night (December 28) on its original Atlanta-Tampa route. Special flight FL 1 arrived at the gate at Tampa International Airport (TPA) at 2339 (11:39) EST. As a result, the AirTran brand was retired and the flight marked the full integration of AirTran into Southwest Airlines (Dallas). The last flight was operated with Boeing 717-2BD B717JL (msn 55042).

Read about the history of AirTran Airways: CLICK HERE

Southwest Airlines issued this statement:

Southwest Airlines embarked on a new era on December 28 as it celebrated the last AirTran Airways revenue flight. At 10:25pm EST, AirTran Airways Flight 1 departed Hartsfield-Jackson Atlanta International Airport to Tampa Bay International Airport.

“With this special flight, we are celebrating history and setting our sights on a bright future for all of Southwest Airlines,” said Bob Jordan, Southwest Airlines’ Chief Commercial Officer and AirTran Airways President, who was on the flight to Tampa. “The work of so many People culminates in this moment as we salute the enormous accomplishments of AirTran and Southwest. For our Customers and Employees, we now move forward with one airline, one Customer Experience, one flight schedule, one Rapid Rewards frequent flyer program, and one award-winning Brand.”

More than 400 AirTran and Southwest Employees and special guests gathered in Atlanta Sunday evening to commemorate the milestone. AirTran Flight 1 retraced a route that is a nod to AirTran’s first commercial flight in October 1993. Flight 1’s flight crew consisted of longtime AirTran Employees, including the airline’s Chief Pilot, Floy Ponder, a 19-year veteran of AirTran Airways. Each of the flight’s 117 passengers, consisting of many former AirTran Employees, retirees, special guests, and aviation enthusiasts received a special keepsake celebrating the historic flight.

“As we’ve grown in both the domestic and international markets, I can’t help but think about all the doors the AirTran acquisition has opened for Southwest Airlines,” said Gary Kelly, Southwest Airlines Chairman, President & CEO, who was in Atlanta for the send-off. “The most important things—which cannot be measured and are irreplaceable—are the great People of AirTran who have worked hard to achieve this milestone, and are all soon to be part of the Southwest Airlines family.”

The acquisition of AirTran was a unique opportunity to extend the Southwest network into key markets it didn’t yet serve, such as Atlanta and the greater Washington, D.C., area, via Ronald Reagan National Airport. The integration gives Southwest the opportunity to serve Customers from 93 airports in the U.S. and near-international destinations, providing Customers more low-fare destinations as it expands the well-known “Southwest Effect” to hundreds of additional low-fare itineraries for the traveling public.

Southwest Airlines acquired AirTran Airways in 2011.

Photo: Southwest Airlines. Boeing 717-2BD N717JL taxies into the gate at TPA ending the history of the airline.

AirTran Airways aircraft slide show: 

Video: Southwest Airlines. The last AirTran flight from Atlanta to Tampa:

Video:

Delta Air Lines (Atlanta) is bringing its leased Boeing 717-200s to the U.S. West Coast on four routes. Los Angeles-Las Vegas, Los Angeles-Portland, Oregon, Salt Lake City-Kansas City and Salt Lake City-Las Vegas will be changed to Boeing 717-200 equipment starting on June 4 per Airline Route.

In other news, Delta is bringing back the Boeing 747-400 on the Atlanta-Honolulu route starting on May 1.

Copyright Photo: Gilbert Hechema/AirlinersGallery.com. Boeing 717-231 N927AT (msn 55077) departs from Montreal (Trudeau).

Delta Air Lines aircraft slide (current livery): 

Delta Air Lines (Atlanta) has now confirmed our previous report of adding the Boeing 717 type to the West Coast Delta Shuttle between Los Angeles and San Francisco. The airline issued this statement today:

Delta Air Lines will introduce Boeing 717 aircraft on eight of the 15 daily flights between Los Angeles International and San Francisco International airports in June, offering 40 percent more seats on its hourly nonstop Delta Shuttle.

Delta launched its hourly nonstop Delta Shuttle product from Los Angeles to San Francisco in September 2013, adding a California perspective to its long relied-upon New York-based Shuttle. The mainline 717s seat 110 passengers and offer access to power from every seat. The remaining seven daily West Coast Shuttle flights will continue to be operated by Delta Connection partner Compass Airlines using 76-seat Embraer ERJ 175 aircraft. All Shuttle flights offer access to First Class and Economy Comfort seating and feature Wi-Fi service, as does nearly every domestic Delta flight out of Los Angeles.

The 717 upgrade on the West Coast Shuttle is the latest in a series of investments in Los Angeles by the airline. Last month, Delta announced plans to begin daily nonstop service to Shanghai in July. Pending foreign government approval, seasonal service from Los Angeles to Managua, Nicaragua, will also begin this summer. These new routes build on Delta’s expansion in both international and domestic service from Los Angeles in recent months, including London-Heathrow in October; Dallas/Fort Worth* and Austin, Texas* in November; and Vancouver, Canada* in December.

*Flight operated by Delta Connection carrier Compass Airlines

From Los Angeles, Delta currently operates 154 peak-day departures to 48 destinations. At the airport, travelers passing through Los Angeles continue to enjoy the benefits of the $229 million expansion and enhancement of Terminal 5 at LAX, scheduled for completion in May 2015. Once onboard, Delta supports and markets the music of emerging artists and short-form content creators through exclusive partnerships that provide in-flight content for customers, who can now enjoy free entertainment from every seat out of Los Angeles through the new Delta Studio product.

Copyright Photo: Tony Storck/AirlinersGallery.com. Boeing 717-2BD N894AT (msn 55003) taxies to the runway at Baltimore/Washington.

Delta Air Lines aircraft slide show (current livery):

Hawaiian Airlines (Honolulu) has announced the completion of a comprehensive retrofit on the first of its 18 Boeing 717 aircraft, featuring an island-inspired interior cabin redesign and new lightweight Main Cabin seating from Acro Aircraft Seating Limited (below).

Above Photo: Hawaiian Airlines.

Previously, five different cabin configurations were operating among Hawaiian’s neighbor island fleet. When all reconfigurations are complete later this year, the identical galley, lavatory, and 128-seat configuration onboard each aircraft will provide a consistent onboard experience for travelers while decreasing the airline’s operational complexity.

Intended to evoke high-performance automotive design, the new Main Cabin seats complement the fast and reliable service of Hawaiian’s 20 to 60 minute flights. The seatbacks offer a ‘tablet table’ machined from solid aluminum, sized and designed for complimentary beverage service and the use of a tablet device.

The refreshed interior color palette connects travelers with the elements of the islands through earth tones, a deep aqua seat, and accents of fuchsia and sky blue. Contrast stitching in the upholstery brings out natural forms of the islands. Other design elements include new seat covers and leather arm caps in First Class; new carpeting, galley flooring and curtains; and new forward windows on certain aircraft.

The airline’s entire narrow-body fleet, which operates more than 160 short haul flights daily between the islands of the state, will be retrofitted to feature these new cabin enhancements by the end of 2015.

Top Copyright Photo: Ivan K. Nishimura/AirlinersGallery.com. Boeing 717-22A N475HA (msn 55121) taxies at the Honolulu hub.

Hawaiian Airlines aircraft slide show: 

QANTAS Link has announced that it will create a Boeing 717 heavy maintenance base in Canberra, generating up to 40 highly skilled engineering roles in the nation’s capital.

“From October, Canberra will be at the heart of our Boeing 717 engineering operations, which will complement our increased flying out of Canberra with this aircraft type and allow us to better utilize our existing assets at Canberra Airport,” Mr Gissing said.

Heavy maintenance checks are detailed checks of the aircraft, performed every two years on the Boeing 717. On average, it takes around 28 days and 5500 man hours for a Boeing 717 to have a heavy maintenance check.

This is in addition to line maintenance checks, which are basic checks that are done every few days, and currently performed in ports across Australia, including Canberra. QANTAS Link has 18 Boeing 717-200s in its fleet.

The company conducts heavy maintenance on its Bombardier Q400, Q300 and Q200 at its heavy maintenance facility in Tamworth.

In other news, QANTAS Airways (Sydney) today celebrates the 50th anniversary of its first jet service between New Zealand and Australia.

Above Copyright Photo: Antony J. Best/AirlinersGallery.com. Boeing 707-138B VH-XBA (msn 17696) departs from Southend.

On April 10, 1965, a 104 seat QANTAS Boeing 707 (V-jet) aircraft departed Sydney for Christchurch, where it was welcomed by a 10,000 strong crowd. The new Boeing 707s offered a comfortable 20-seat First cabin and 84 seats in Economy.

Previously the Tasman route was serviced by a propeller-driven Lockheed Electra aircraft, and prior to that, Shorts Empire Flying Boats which seated a maximum of 15 passengers and took around nine hours to travel from Auckland to Sydney. The journey now takes around 3 hours.

The inaugural V-jet service was commanded by Chief Pilot Line Operations, Captain “Torchy” Uren and NZ-born cabin crew members Bob Bishop, Alan Williams and Alan Gill as well as Anne Claydon from Lyttelton in Christchurch. QANTAS Founder Sir Hudson Fysh and Lady Fysh were onboard the inaugural service.

Above Photo: QANTAS Airways. Co-Founder Hudson Fysh (right) and Lady Fysh were on the inaugural service welcomed by Mayor of Christchurch, Mr G. Manning (left).

Below Photo: QANTAS Airways. The arrival was met by 10,000 people.

QANTAS was established in New Zealand in 1940, when Tasman Empire Airways Limited (TEAL), formed by QANTAS, Imperial Airways (BOAC), and a partnership of Union Airways of New Zealand and the New Zealand Government, inaugurated a weekly service between Sydney and Auckland.

Above Copyright Photo: Jacques Guillem Collection/AirlinersGallery.com. QANTAS Airways Lockheed 188C Electra VH-ECD (msn 2008).

In October 1961, QANTAS began operations in its own right across the Tasman jointly with TEAL, serviced by an Electra international aircraft.

QANTAS today operates more than 200 flights per week between New Zealand and Australia, including services between Auckland and Sydney, Melbourne and Brisbane; Wellington and Melbourne; and Christchurch and Sydney. Year-round weekly services between Queenstown and Sydney commenced in October 2005 and now operate three times per week, increasing to daily from Sydney and twice a week from Brisbane during the ski season. Jetstar also operates across the Tasman, and within New Zealand between Auckland, Christchurch, Wellington, Queenstown and Dunedin.

Top Copyright Photo: Rob Finlayson/AirlinersGallery.com. Operated under contract by Cobham Aviation Services Australia (formerly National Jet Systems), Boeing 717-2BL VH-NXR (msn 55168) operating as QANAS Link, departs from Brisbane.

QANTAS Airways aircraft slide show: 

QANTAS Link-Cobham aircraft slide show: 

Delta Air Lines (Atlanta) today reported financial results for the March 2015 quarter kicking off the airlines earnings reporting period. Key points include according to the airline:

Delta’s adjusted pre-tax income1 for the March 2015 quarter was $594 million, an increase of $150 million over the March 2014 quarter on a similar basis. Delta’s adjusted net income for the March 2015 quarter was $372 million, or $0.45 per diluted share, and its adjusted operating margin was 8.8 percent.

On a GAAP basis, Delta’s March quarter pre-tax income was $1.2 billion, operating margin was 14.9 percent and net income was $746 million, or $0.90 per share.

Results include $136 million in profit sharing expense, recognizing Delta employees’ contributions toward meeting the company’s financial goals.

The company used its strong cash generation in the quarter to return $500 million to shareholders through dividends and share repurchases and to make $904 million in pension contributions.

“Delta’s business is performing well, producing the best March quarter, both operationally and financially, in Delta’s history,” said Richard Anderson, Delta’s chief executive officer. “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. We are looking at June quarter operating margins of 16-18 percent with over $1.5 billion of free cash flow—these record results and cash flows show that the strong dollar is a net positive for Delta.”

Capacity Actions in Light of Strong Dollar and Lower Energy Prices

To address currency headwinds, Delta plans to reduce its international capacity by 3 percent year over year for the winter schedule. These international reductions, combined with 2 percent domestic growth, will result in flat system capacity for the December quarter. Capacity adjustments will be focused on markets that have been most affected by the strong dollar and markets where demand has been negatively impacted by the decline in oil prices. Key actions for the December quarter will include a 15-20 percent reduction in service from Japan, a 15 percent reduction to Brazil, a 15-20 percent reduction to Africa, India and the Middle East, and suspension of service to Moscow for the winter season.

Revenue Environment

Delta’s operating revenue improved 5 percent, or $472 million, in the March 2015 quarter compared to the March 2014 quarter. Traffic increased 3.6 percent on a 5.0 percent increase in capacity, which includes 2 points due to capacity removed in the first quarter of 2014 as a result of winter storms. Foreign exchange pressured revenue by $105 million for the quarter.

Passenger revenue increased 3 percent, or $246 million, compared to the prior year period.

Passenger unit revenue (PRASM) decreased 1.7 percent year over year primarily driven by 1.5 points of negative foreign exchange impact.

Cargo revenue was unchanged from the prior year period as higher volumes offset lower yields.
Other revenue increased 22 percent, or $226 million, driven by SkyMiles revenues and third-party refinery sales.

“For the March quarter, Delta delivered solid 5 percent top line growth and a 17.8 percent operating margin at market fuel prices,” said Ed Bastian, Delta’s president. “The substantial benefit from lower fuel prices will again more than offset the unit revenue decline of 2 to 4 percent for the June quarter to produce operating margins north of 20 percent at market fuel prices.”

Fuel

Adjusted fuel expense2 increased $23 million as lower market fuel prices were offset by $1.1 billion of settled hedge losses, including $300 million of early settlements of contracts originally settling in the second half of 2015 as the company restructured its hedge book. Delta’s average fuel price was $2.93 per gallon for the March quarter. Operations at the refinery produced an $86 million profit for the March quarter, a $127 million improvement year-over-year.

Cost Performance

Consolidated unit cost adjusted for fuel expense, profit sharing and special items (CASM-Ex3), was down 1.4 percent in the March 2015 quarter on a year-over-year basis, with higher capacity, foreign exchange and the benefits of Delta’s domestic refleeting and other cost initiatives offsetting the company’s investments in its employees, products and operations.

“With nearly 10 percent of our expenses non-dollar denominated, we are seeing cost tailwinds from the strong dollar which should benefit our non-fuel unit costs by 1 point in the June quarter,” said Paul Jacobson, Delta’s chief financial officer. “With this currency benefit and the strong cost control that is a hallmark of the Delta culture, we are on track to deliver our eighth consecutive quarter of non-fuel unit cost growth below 2 percent in the June quarter.”

Adjusted for special items, non-fuel operating expense in the quarter increased $333 million year-over-year driven by wage increases, profit sharing, and higher volume-related expenses. These cost increases were partially offset by foreign exchange and savings from Delta’s cost initiatives.

Non-operating expense, adjusted for special items, declined by $34 million as a result of $55 million in lower interest expense, partially offset by an $11 million higher foreign exchange loss on foreign-denominated assets and liabilities compared to the first quarter of 2014.

Cash Flow

Cash from operations during the March 2015 quarter was $1.1 billion and free cash flow was $511 million, driven by the company’s March quarter profit and the normal seasonal increase in advance ticket sales. Cash flow from operations and free cash flow exclude the return of fuel hedge margin posted. Capital expenditures during the March 2015 quarter were $586 million, including $411 million in fleet investments. During the quarter, Delta’s net debt and capital lease maturities were $260 million.

With its strong cash generation in the March 2015 quarter, the company returned $500 million to shareholders. The company paid $75 million in cash dividends and repurchased 9.3 million shares for $425 million. Delta also made over $900 million in pension contributions during the quarter.

Delta ended the quarter with adjusted net debt4 of $7.4 billion, including cash held by counterparties as hedge margin. The company has achieved nearly $10 billion in net debt reduction since 2009, resulting in a roughly 50% reduction in annual interest expense.

GAAP Metrics Related to Cost Performance and Cash Flow

On a GAAP basis compared to the March 2014 quarter, consolidated CASM declined 8 percent, total operating expense was down $306 million, and fuel expense declined $600 million. GAAP fuel cost per gallon for the quarter was $2.29. Non-operating expenses for the quarter decreased by $73 million. Cash from operations for the March 2015 quarter was $1.6 billion and the company ended the quarter with debt and capital lease obligations of $9.6 billion on a GAAP basis.

June 2015 Second Quarter Guidance

Following are Delta’s projections for the June 2015 quarter:

2Q15 Forecast

Operating margin

16% – 18%
Fuel price, including taxes, settled hedges and refinery impact

$2.35 – $2.40
CASM – Ex (compared to 2Q14)

Up 0 – 1%
System capacity (compared to 2Q14)

Up ~3%

Special Items

Special items, net of taxes, in the March 2015 quarter totaled $374 million, including:

$372 million for mark-to-market adjustments and settlements on fuel hedges;
$8 million for mark-to-market adjustments on hedges owned by Virgin Atlantic; and
a $6 million charge for fleet and other items, primarily associated with Delta’s domestic fleet restructuring initiative.
Special items, net of taxes, in the March 2014 quarter totaled $68 million, including:

a $31 million charge associated with Delta’s domestic fleet restructuring;
a $21 million mark-to-market adjustment on fuel hedges;
an $11 million charge for debt extinguishment; and
a $5 million charge for mark-to-market adjustments on hedges owned by Virgin Atlantic.

End Notes

(1) Note A to the attached Consolidated Statements of Operations provides a reconciliation of non-GAAP financial measures used in this release to the comparable GAAP metric and provides the reasons management uses those measures.

(2) Adjusted fuel expense reflects, among other things, the impact of mark-to-market (“MTM”) adjustments and settlements. MTM adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settling during the period. These items adjust fuel expense to show the economic impact of hedging, including cash received or paid on hedge contracts during the period. During the March 2015 quarter, we paid $302 million to early settle contracts that were originally scheduled to expire in the second half of 2015. See Note A for a reconciliation of adjusted fuel expense and average fuel price per gallon to the comparable GAAP metric.

(3) CASM – Ex: In addition to fuel expense, profit sharing and special items, Delta believes adjusting for certain other expenses is helpful to investors because other expenses are not related to the generation of a seat mile. These expenses include aircraft maintenance and staffing services Delta provides to third parties, Delta’s vacation wholesale operations, and refinery cost of sales to third parties. The amounts excluded were $293 million and $184 million for the March 2015 and March 2014 quarters, respectively. Management believes this methodology provides a more consistent and comparable reflection of Delta’s airline operations.

(4) Adjusted net debt includes $383 million of hedge margin receivable, which is cash that we have posted with counterparties as hedge margin. See Note A for additional information about our calculation of adjusted net debt.

Fiona Cincotta, senior market analyst at www.finspreads.com commented on the financial results:

“Delta reported the best first quarter, from a financial perspective, in the company’s history. The airline announced profits, which more than tripled to $746 million from $213 million a year ago and an increase in revenue of 5% to $9.4 billion. The strong dollar has dented Delta’s international revenue to the tune of about $105 million, however it has also been a factor in the decline of the price of oil which has meant cheaper fuel for the company so the strong dollar is actually net positive for Delta. Furthermore Delta expects to save more than $2 billion on fuel this year and also expects record profit margins and free cash flow for the second quarter.

Despite these encouraging results, which beat analyst’s expectations, Delta has also announced that it will be reducing international flights by a further 3% during the last 3 months of the year. This seems to be quite a prudent move by a company who has reported the best first quarter in its history. However, as big price cuts are no longer a significant part for large US airline’s strategy, pulling back on flights seems like a sensible option given the expected strength of the dollar going forward.”

Copyright Photo: TMK Photography/AirlinersGallery.com. Delta is now leasing the former AirTran Airways Boeing 717 fleet from Southwest Airlines. Boeing 717-231 N921AT (msn 55082) taxies at Toronto (Pearson).

Delta Air Lines aircraft slide show (current livery): 

Delta Air Lines (Atlanta) today reported its best second quarter financial results in its history:

Delta Air Lines today reported financial results for the second quarter (June) 2015 quarter, including adjusted net income of $1.0 billion or $1.27 per diluted share, up 22% from the same quarter in 2014.

“Delta’s record results have allowed the company to invest in its employees through higher wage rates and profit sharing; improve the experience for our customers through new aircraft and innovative partnerships with global carriers; and uniquely deliver value for our shareholders by accelerating our capital returns while also paying down debt,” said Richard Anderson, Delta’s chief executive officer. “We have more work and opportunity ahead of us on all of these fronts as we continue to execute on our long-term plan.”

Anderson continued, “Our significant fuel savings in the September quarter should allow us to produce another record quarter with more than 30% EPS growth, a 19-21% operating margin and $1.9 billion of operating cash flow.”

Revenue Environment

Delta’s operating revenue for the June quarter increased 1%, despite $160 million in foreign currency pressures which reduced unit revenues by approximately 2 points. Passenger unit revenues declined 4.6% on a 3.9% decline in yields.

Delta saw solid progress with several of its revenue initiatives, including Branded Fares, which increased passenger revenues by $56 million, and its enhanced agreement with American Express, which produced an incremental $60 million in revenue.

“Our commercial initiatives continue to gain traction in the marketplace and we will produce summer margins in excess of any achieved in our history,” said Ed Bastian, Delta’s president. “However, unit revenue growth is an important component of our long-term plan to expand margins. We continue to project flat system capacity growth for the fourth quarter of 2015 – a level in line with current demand expectations, which should put the business on the right trajectory to stem the erosion in unit revenues by the end of the year.”

Investment Strengthens Partnership and Expands Global Reach

Strengthening its existing partnership with Gol, Delta recently agreed to purchase up to $56 million in preferred shares as part of a larger rights offering by the Brazilian carrier. In addition to the equity, Delta will guarantee up to $300 million in borrowings by Gol under a term loan with third-party lenders. Delta’s guarantee will be secured by Gol’s interest in SMILES, Gol’s publicly-traded loyalty program. Delta and Gol have also agreed to extend their exclusive commercial agreement for flights between the United States and Brazil, the largest aviation market in Latin America. This transaction is subject to normal closing conditions, including regulatory approvals.

Cost Performance

Adjusted fuel expense2 declined over $463 million compared to the same period in 2014, as 39% lower market fuel prices and a $77 million increase in profit at the refinery offset nearly $600 million in settled hedge losses. For the remainder of 2015, Delta expects its fuel expense to be $1.90 – $2.00 per gallon, a significant reduction to the $2.65 per gallon it realized in the first six months of the year.

CASM-Ex3 decreased 0.8% for the June quarter on a year-over-year basis, with foreign exchange and the benefits of Delta’s domestic refleeting and other cost initiatives offsetting the company’s investments in its employees, products and operations. This marks the eighth consecutive quarter of CASM growth below 2%, in line with the company’s long-term goals.

Delta’s debt reduction initiative continued to improve the company’s interest expense, producing $46 million in interest savings for the quarter compared to the same period in 2014.

“Because of the momentum we’ve built with our cost reduction initiatives, we expect to post our ninth consecutive quarter of sub-2% unit cost growth in September,” said Paul Jacobson, Delta’s chief financial officer. “Cost efficiency has contributed to the record results that allowed us to return $1 billion to shareholders in the June quarter while investing in our employees and customer experience.”

Cash Flow, Shareholder Returns, and Adjusted Net Debt

Delta generated $2.5 billion of adjusted operating cash flow and $1.6 billion of free cash flow during the quarter. The company used this strong cash generation to reinvest nearly $1 billion back into the business, primarily for aircraft purchases. The company returned $1.0 billion to its owners through $72 million of dividends and $925 million of share repurchases, while also strengthening its balance sheet by reducing its adjusted net debt to $7.1 billion.

September 2015 Quarter Guidance

Following are Delta’s projections for the September 2015 quarter:

3Q15 Forecast

Unit Revenue (compared to 3Q14)

(4.5%) – (6.5%)

Operating margin

19% – 21%

Fuel price, including taxes, settled hedges and refinery impact

$1.90-$1.95

CASM – Ex (compared to 3Q14)

Flat

System capacity (compared to 3Q14)

~3%

Special Items

Special items, net of taxes, in the June 2015 quarter totaled $458 million, including:

$454 million for mark-to-market adjustments and settlements on fuel hedges;

a $16 million charge for fleet and other items, primarily associated with Delta’s domestic fleet restructuring initiative; and

$20 million for mark-to-market adjustments on hedges owned by Virgin Atlantic.
Special items, net of taxes, in the June 2014 quarter totaled $88 million, including:

a $69 million charge for debt extinguishment associated with Delta’s debt reduction initiative; and

a $20 million charge associated with Delta’s domestic fleet restructuring.

Top Copyright Photo: Fred Freketic/AirlinersGallery.com. Delta has been introducing the former AirTran Airways Boeing 717s around the country including the West Coast. Boeing 717-2BD N966AT (msn 55027) departs from the New York (JFK) hub. All 717s are leased from Southwest Airlines.

Delta Air Lines aircraft slide show (current livery):

Scandinavian Airlines-SAS (Stockholm) is now planning to phase out the last Boeing 717 with subsidiary Blue1 (Helsinki) on November 6. The last 717 flight is expected to be flight SK724 from Stockholm (Arlanda) to the Helsinki base according to Airline Route.

As previously reported, Blue1 will sell its entire Boeing 717-200 fleet to Volotea and Delta Air Lines and replace them with Boeing 737-600s transferred from Scandinavian Airlines.

Copyright Photo: Ton Jochems/AirlinersGallery.com. Boeing 717-2CM OH-BLI (msn 55061) taxies at Amsterdam.

Blue1 aircraft slide show:

Scandinavian Airlines-SAS (Stockholm) has made this announcement today:

SAS’s strategy is to offer frequent travelers a broad network with frequent flights to, from and within Scandinavia. To adapt the size of the production to traffic flows SAS utilizes hired capacity, known as a wet lease, with smaller regional jet and turboprop aircraft.

In line with this strategy, SAS has entered into an agreement with CityJet (Dublin) on the wet lease of eight new Bombardier CRJ900s. SAS already operates twelve regional jet aircraft of this type through its subsidiary, Cimber.

The new aircraft, which each have 90 seats and are painted in SAS colors, will be put into service from March 2016 on routes and at times when there is a need for smaller aircraft. The wet lease agreement is for three years and covers eight Bombardier CRJ900s with an option on a further six aircraft.

As part of this collaboration, CityJet is acquiring 100% of the shares in SAS subsidiary Blue1. The sale of Blue1 will lead to a marginal impact on SAS’s income before tax, cash and net debt. The Group’s income after tax during Q4 2014/2015 will be negatively impacted of around MSEK 90, primarily due to write down of capitalized loss carry forwards. The sale and the new wet lease agreement are expected to increase cost efficiency and flexibility.

Above Copyright Photo: Rolf Wallner/AirlinersGallery.com. It is unclear what CityJet will do with Blue1. Blue1 currently operates five Boeing 717-200s and SAS is selling the 717s to Volotea and Delta. The type is due to be retired at Blue1 next month. Will Blue1 operate the CRJ900s for SAS? Boeing 717-23S OH-BLM (msn 55066) taxies at Zurich.

Airline Aircraft Type “Endangered Species List”: 

CityJet is a European airline that was founded in 1992. CityJet has a fleet of 18 Avro RJ85 jet aircraft and it operates over 680 flights per week throughout Europe.

In the meantime, CityJet made this announcement today:

CityJet wins major contract to operate SAS regional routes and places order for up to 14 Bombardier CRJ900 aircraft.

Irish airline CityJet has been awarded a major wet lease contract by SAS (Scandinavian Airlines) to operate a network of regional routes from Helsinki, Oslo and Stockholm . Commencing in March 2016, CityJet will operate services on behalf of SAS using eight new aircraft, with an option to increase to 14 aircraft in 2017.

CityJet has also announced that it is to acquire eight 90-seat Bombardier CRJ900 regional jets, major components of which are manufactured by Bombardier Aerospace in Belfast. The CRJ900 fleet will be operated exclusively on behalf of SAS, with all aircraft in SAS colors and crewed by CityJet staff.

In addition to the eight aircraft in 2016, the contract has potential to add six further aircraft in 2017, bringing the total aircraft value to over $650m;

Since becoming independent last year, CityJet has seen continual growth across its network, and will carry over two million passengers this year on its scheduled services, charter services, and a Paris-based wet lease programme for Air France.

The airline has recorded 40% growth on its key route Dublin to London City route in the last six months, as well as strong advance bookings for the new Cork to London City service, which commences today and will see up to eighteen flights a week on the route.

CityJet now employs almost 500 staff, with over 300 based at its headquarters in Swords, County Dublin, and additional crew bases in London and Paris.

Top Copyright Photo: Paul Bannwarth/AirlinersGallery.com. SAS Bombardier CRJ900 (CL-600-2D24) OY-KFD (msn 14221) prepares to land in Zurich.

SAS aircraft slide show: 

CityJet aircraft slide show: 

Blue1 aircraft slide show: 

Delta Air Lines (Atlanta) today reported its financial results for the September 2015 (third) quarter, including adjusted net income of $1.4 billion or $1.74 per diluted share, up 45% from the September quarter of 2014.

Read the full report: CLICK HERE

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Formerly painted in AirTran Airways’ Atlanta Falcons special scheme, Boeing 717-2BD N891AT (msn 55043) now flies for Delta, leased from Southwest Airlines.

Delta Air Lines aircraft slide show: 

Delta Air Lines (Atlanta) has issued this statement explaining its fleet strategy is driven by opportunity and flexibility:

Delta does things differently than most airlines, and that includes the way it buys airplanes.

While most big carriers replenish and expand their fleets with brand new jets, which are either leased or purchased, Delta has purchased a mix of new and used aircraft over the past several years.

Ed Lohr, Delta’s Managing Director of Fleet Strategy, explained that the airline looks at the entire cost of jet – the purchase price, the maintenance costs, fuel efficiency and other factors – before making decisions. Often, used aircraft make the most economic sense for the airline.

And thanks to Delta’s TechOps aviation maintenance team, used planes can be maintained and retrofitted with entirely new interiors, providing a superior customer experience even though the jet may be a few years old.

And Delta typically purchases planes outright rather than leasing them.

“We do have a different strategy than most of our competitors,” Lohr said. “When you have a strong balance sheet like we do, a great TechOps organization like we do, it gives you a lot more flexibility to take advantage of opportunities when they come up.”

Above Copyright Photo: Brian McDonough/AirlinersGallery.com. Ex-AirTran Airways Boeing 717-231 N925AT (msn 55079) arrives at Baltimore/Washington (BWI). N925AT was formerly painted in the special “The Wizarding World of Harry Potter” (Universal) livery.

For example, Delta acquired 88 used Boeing 717 (above) after Southwest inherited them in its merger with AirTran Airways. Those jets fill a critical role in Delta’s domestic network, and were given nose-to-tail revamps before entering service.

Delta has similarly scoured the world for used MD-90 jets, reliable narrowbodies that are also dramatically upgraded and brought into the fleet at a very reasonable price.

Still, Delta will buy new when it makes sense. For example, the airline recently ordered 25 fuel-efficient Airbus A350-900s to fly primarily long-haul trans-Pacific routes starting in 2017.

The aircraft strategy is one of the reasons Delta has been able to pay off more than $10 billion in debt since 2008, and has seen its credit rating rise to just one notch below investment grade. Less money is tied up in expensive new jets, and instead can be invested in airport facilities, operational performance, new technology and on-board improvements to enhance the customer experience.

“The days of buying just one brand of aircraft, or signing huge orders all at once, those are definitely over,” Lohr said. “At least, they are for us.”

Trebor Banstetter

Graph:

In a related story, Delta also issued this further clarification after CEO Richard Anderson’s recent comment about an “aircraft bubble” (also reported by us):

The aviation world was buzzing last week after Delta CEO Richard Anderson discussed an “aircraft bubble” that has been dramatically pushing down prices of used widebody aircraft.

“We’re seeing a huge bubble in excess wide-body airplanes around the world,” Anderson said during Delta’s third quarter earnings conference call. Anderson said he had seen mid-life Boeing 777-200 aircraft being available in the market at about $10 million.

Delta’s aircraft experts, Greg May, Senior Vice President – Supply Chain Management, and Ed Lohr, Managing Director – Fleet Strategy, told Delta News Hub that several trends have conspired over the last few years to create a “perfect storm” driving down prices.

The major factors:

A large number of leased widebody aircraft are being returned to lessors and manufacturers, causing a glut in the market.

Boeing 777While Delta generally purchases both new and used aircraft, many carriers lease new planes, turning them in when the lease ends, usually after seven to 10 years. Those aircraft often end up on the used airplane market.

One factor driving the large number of leased aircraft now being sold is the nearly four-year delay in deliveries of Boeing’s 787 jet, Lohr said. The delay caused many airlines to lease Airbus A330 and Boeing 777 aircraft (left) to bridge the gap while waiting for their orders to be fulfilled. Many of those aircraft are now nearing the end of their leases and being returned.

One aircraft in particular – the Boeing 777-200ER powered by Rolls-Royce Trent engines –will be entering the used market in significant numbers over the next couple years, May said. He also cited the new Airbus A350 (below), a twin-engine long-haul competitor to the Boeing 787, which has reduced demand for the 777.

“There was a time when the 777 had that market all to itself,” May said. “With the A350 and the 787 that’s no longer the case, so it’s not as attractive.”

Softness in the international economy has slowed capacity growth and reduced demand for wide-body aircraft, pushing down prices.

Economic softness in Asia and Latin America has caused many foreign airlines to tamp down growth plans. That has resulted in leased widebody aircraft being returned earlier than expected.

“They are paying the rent on those planes every month, so it’s very expensive to park them,” Lohr said. “That’s why they are not extending leases and in some cases are willing to pay a penalty to get out of other lease early, in each case, increasing the availability of used aircraft in the market.”

In addition, lower fuel prices have blunted a major advantage of new planes, which tend to be more fuel efficient.

Cheap financing created a demand for new aircraft, lowering the value of used jets.

Historically airlines in small and developing nations primarily leased or purchased used aircraft because they couldn’t afford new jets. But a wave of cheap financing, some from export credit agencies, has made it much easier for those airlines to buy new planes. Less demand for used aircraft means lower prices.

Airbus A350Lohr likened the widebody jet bubble to the housing bubble in the U.S. that burst in 2008 and collapsed the real estate market.

“Why did we have a real estate bubble? Because anyone and his brother could get a loan,” he said. “It’s the same story with new airplanes.”

While these factors have primarily impacted the widebody market, the narrowbody market is likely to be affected as well, Lohr said.

“The economics and the trends will eventually get to the narrowbodies,” he said.

After Anderson’s comments, Boeing’s stock value plunged. Analysts issued a flurry of reports debating the issue, and the question will likely be in the spotlight this week when Boeing announces its third quarter earnings.

Reuters reported Friday that Boeing may need to slow production of its Boeing 777 because of the weakness in the used aircraft market. Orders for the current generation 777 have fallen from 194 in 2011 to 63 in 2014 and just 34 this year, according to the report.

“Boeing is going to have to slow down the production rate,” Gueric Dechavanne of appraisal firm Collateral Verifications told Reuters.

Despite the attention that Anderson’s remarks received, Delta isn’t in negotiations to purchase used planes for the airline to fly right now, May said.

During the earnings call, Anderson said that he expects prices to decline further.

“Prices are going to get lower,” he said. “You wouldn’t strike a deal now.”

Delta Air Lines aircraft slide show (current livery): 

Scandinavian Airlines-SAS (Stockholm) is now planning to operate the last Boeing 717 revenue flight on October 31. The last flight is currently scheduled to be flight SK1768 between Prague and Stockholm (Arlanda) according to Airline Route. The 717s are operated by Blue1 (Helsinki) for SAS.

As previously reported, SAS sold Blue1 to CityJet and will continue to operate operate other aircraft types for SAS under contract.

Copyright Photo: Andi Hiltl/AirlinersGallery.com. Boeing 717-23S OH-BLP (msn 55064) in the Star Alliance scheme departs from Zurich.

Blue1 aircraft slide show: 

Airline Aircraft Type “Endangered Species List” (kept up to date): CLICK HERE