Delta Air Lines projects corporate demand this year will meet or exceed 2014 levels, although it is sticking to its current capacity plans despite a potential windfall from lower fuel costs.
Delta president Ed Bastian, speaking Tuesday during the company's fourth-quarter earnings call, said a recent survey of corporate customers showed 88 percent planned to increase or at least maintain their travel spending levels during the first quarter and throughout the rest of the year. Sectors that have shown demand strength include financial services, automotive and media, he said.
Corporate sales revenues for 2014 were up 7 percent year over year, he said.
The carrier reported a $712 million loss for the fourth quarter of 2014 largely because of fuel hedging, but its full-year results beat analysts' expectations. Net income for 2014 was $659 billion and 78 cents per share, slightly above analysts' consensus estimate of 77 cents.
Another sign of continuing demand strength: Consolidated passenger revenue per available seat mile in the fourth quarter increased 0.8 percent year over year. In a research note, Cowen and Co. analyst Helane Becker said that analysts had feared "PRASM trends would turn negative as a result of lower jet fuel costs," but with Delta's performance, "those fears should subside."
PRASM during the quarter was up 5.2 percent on Delta's mainline domestic flights, alongside a 5.2 percent increase in capacity. PRASM was down, however, on Atlantic, Pacific and Latin America routes as well as regional service, Delta reported.
Capacity during the quarter increased 4 percent, and load factor increased 0.2 percentage points to 82.8 percent. Yield increased 0.6 percent.
Despite the loss due to hedging, Delta stands to benefit from lower fuel prices, CEO Richard Anderson said. Delta's average fuel cost per gallon in the fourth quarter was $2.62, compared with $3.05 per gallon in the fourth quarter of 2013, and that is set to go to $2.50 or lower during the first quarter, according to Delta's guidance. The lower fuel costs this year should mean $2 billion in savings compared with 2014, Anderson said.
Reiterating assertions made during an investor presentation in December, Anderson said those savings were "an opportunity to accelerate progress toward long-term goals"—including decreasing net debt—and that the carrier had no plans to change capacity related to the potential savings.