ATLANTA – Delta Air Lines said it forecasts a pretax profit of $5 billion next year, up from a projection of $4.5 billion for 2014, as it expects to save $1.7 billion in fuel costs even after accounting for hedging losses.
"2015 should be a fantastic year," Chief Executive Richard Anderson told investors at a presentation Thursday in New York.
Shares of Atlanta-based Delta rose 4.6 percent to close Thursday at $48.33. The Bloomberg U.S. airlines index closed up 2.6 percent, the sixth gain in seven trading sessions, on a day when crude oil fell to its lowest settlement price since July 2009. Spirit Airlines was the lone carrier in the 11-company gauge to post a decline.
Anderson set the tone for the airline industry's rally by predicting that Delta will return at least $1.5 billion to shareholders next year, raising its forecast for fourth-quarter operating margins and quantifying the benefit from lower bills for jet kerosene. That benefit includes the drag from a $1.2 billion loss on contracts that pegged the price of fuel higher than the market.
Delta is among carriers with the greatest fuel hedges, and analysts have said that could keep it from benefiting as much as its peers from plummeting oil prices. Delta said Thursday it expects to see "full participation" in fuel savings in 2016.
Next year, Delta sees fuel prices at $2.40 to $2.50 a gallon, down from $2.69 to $2.74 a gallon it had projected to pay in this quarter. Jet fuel was at $2.07 a gallon Thursday, having fallen 34 percent this year.
By comparison, Southwest Airlines expects to pay $2.30 to $2.40 a gallon for jet kerosene next year, based on the forward curve and including the effect of hedging, Chief Executive Gary Kelly said Thursday in a speech in New York. At least a portion of its fuel needs are hedged through 2018.
Delta expects fourth-quarter operating margins of 11.5 percent to 12.5 percent, Anderson said. That compared with an October forecast of 10 percent to 12 percent.
In April, the board will consider renewals of its dividend and share buybacks, Delta said.
Anderson and President Ed Bastian reinforced their message that the airline industry has differentiated itself on service in recent years, and Delta expects to be rewarded.
"We are not a commodity," Anderson said. "This is a really difficult business, this is not soybeans, wheat and corn. It's really hard to do this well. And we don't want to be priced at commodity levels."