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Delta posts profit despite lower airfares

Associated Press logo Associated Press 13/10/2016 Scott Mayerowitz

Lower airfares and rising salaries are putting a squeeze on Delta Air Lines.

Luckily for the airline, the price of jet fuel remains cheap and the Atlanta-based carrier was able to report a third-quarter profit of $US1.26 billion ($A1.67 billion) on Thursday, down 4 per cent from the same period last year.

Summer is typically the strongest period for US airlines and Delta's earnings could signal an end of an extraordinary run of record profits for the industry. The issue is that this era of cheap fuel isn't going to last forever.

Delta - which is the first major US airline to report earnings - paid $1.50 for each gallon of jet fuel in the quarter, down from $1.89 during the same period last year. Every penny per gallon saved adds up with the airline consuming 1.1 billion gallons of fuel during the quarter. Delta warned in its earnings release that, for the first time in several years, year-over-year fuel prices will be higher in the next quarter.

After posting more than $US56 billion in industry profits since 2010, US airlines are now struggling with too many seats in the sky, lower airfares and increased costs for most non-fuel expenses including salaries and payments for new aircraft.

The amount of money Delta collected for each mile that each available seat flew plunged 6.8 per cent during the three months that ended September 30.

The average airfare for each 1000 miles passengers flew during the summer was $US153.80, down 5.3 per cent from the $US162.40 Delta collected during the same period last year.

Delta, the world's second-largest airline by passenger traffic, said it plans to slow its growth to 1 per cent in the next quarter and into 2017 so it can try to raise airfares. It hopes that its industry-leading on-time performance will convince travellers - especially higher-paying business fliers - to book with Delta and possibly pay more to do so.

Delta indicated on a call with investors that airfares may have hit their low point.

But the airline's president, Glen Hauenstein, said he remained "cautiously optimistic".

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