A drop in oil prices means airlines are reaping big in terms of returns as higher expenses commonly associated with jet fuel continue to be slashed. During an interview on CNBC, Delta Air Lines, Inc. (NYSE:DAL) senior vice president, Vinay Dube, reiterated that the ongoing drop in oil prices could result in up to $2 billion in profits this year.
Sentiments by the vice president are sure to be good news for investors who have continued to hold tight on the stock despite the company losing 86 cents or 712 million in fuel hedges. Delta Air Lines, Inc. (NYSE:DAL) now expects to generate up to $3.98 billion in net income this year at the back of the ongoing drop in oil prices.
“We are happy and pleased with the hedging strategy that we have in place and we are going to do it in the future. Despite our hedges, we still expect that at this fuel levels we are going to gain $2 billion to our bottom line in 2015. In 2016 if it continues it is going to be $4 billion,” said Mr. Dube.
The vice president reiterated that the giant airline is not looking to build its margins in the short-term at the back of the low oil prices. But essentially looking to generate high levels of operating margins on a year over year basis regardless of oil prices.
Dube was also quick to quash allegations that Delta Air Lines, Inc. (NYSE:DAL) does not have the interest of travelers at heart in terms of fare reductions and only remained focused on generating shareholder value.
“If you look at the U.S. pricing market for airfares over the last 15 years you compare 2000 and 2015. The price of a ticket, when you adjust the inflation, is really down 10% between 2000 and 2015. If you contrast that with the amount of investment, Delta Air Lines, Inc. (NYSE:DAL) has made in its operation, in its customer experience on board in the airport infrastructure in technology. I would say the value for money that customers are getting today is far better than they have ever got,” said Mr. Dube
Delta Air Lines, Inc. (NYSE:DAL) is looking to expand its wings on the international landscape with direct flights from Loss Angeles Airport to Shanghai in China. Competition should be the biggest headwind on this route with the executive remaining confident that the airline will be up to the task at the back of offering one of the finest customer experience.
Delta Air Lines, Inc. (NYSE:DAL) is also looking to address the interest of its employees by ensuring they remain well paid above the industry average by between 25-30%.
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