Delta Air Lines is taking a conservative approach to the start of 2017 following a slump in profits and revenue in the final quarter of last year.
Virgin Atlantic’s US partner reported a $524 million fall in pre-tax profits to $923 million in the three months to December over the same period the previous year.
This was primarily driven by a new agreement with pilots, although the airline also saw a $44 million quarterly decline in operating revenue.
Passenger revenues declined 2.7% on a 0.9% increase in capacity in the three months.
However, Delta’s full year pre-tax profits rose by 4% over 2015 to a record $6.1 billion, with more than $1 billion going to staff in profit sharing.
The carrier is expecting pressures on margins in the current quarter to March “as the pace of change in unit revenue will not match the cost impact of higher fuel prices and employee wage increases”.
Delta added: “This margin pressure is likely to peak in the March quarter, and the company expects margins to expand beginning in the second half of the year.”
The airline’s president Glen Hauenstein said: “Delta’s commercial strategies and capacity actions combined with improving demand continue to drive benefit as we transition back into sustained positive unit revenues.
“For the March quarter, we expect a unit revenue increase of flat to up 2%, stemming the declines that have been ongoing for two years.
“We will remain conservative and keep our capacity growth in check until we see a further firming of these revenue trends in the near-term and longer-term, a return to our 17-19% operating margin target.”
Chief executive Ed Bastian said: “As we move into 2017, we are seeing our unit revenues turn positive which should return the company to margin expansion by the back half of the year.
“This will allow us to produce the solid returns and cash flows that investors rely upon from Delta.”