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Takeoff! Delta up 3% on profit climb

Charisse Jones
USA TODAY
FILE - This Monday, Aug. 20, 2012, file photo, shows a Delta Air Lines aircraft taking off at Miami International Airport in Miami. Delta Air Lines Inc. announced during the last week of February 2014, that starting Jan. 1, 2015, it will reward passengers for the amount they spend on tickets, not the number of miles they fly. The change to Deltaís SkyMiles program will be great for people who buy expensive tickets in first-class, but bad for vacationers who shop for the cheapest fare. Deltaís decision has renewed the debate about whether airline frequent-flier programs are worthwhile for people who only fly a few times a year. (AP Photo/Alan Diaz, File) ORG XMIT: NY119

Delta Airlines posted a first quarter profit of $746 million or 90 cents per share.

Not counting special items, adjusted net income for the start of the year was $372 million or 45 cents per share, exceeded estimates.

Delta stock, DAL, is up around 3% on the news.

With dividends and share repurchases, the airline gave back $500 million to investors during the first three months of 2015.

"Delta's business is performing well, producing the best March quarter, both operationally and financially, in Delta's history,'' Richard Anderson, the airline's CEO, said in a statement.

Despite weaker foreign currency,which is hurting the exchange rate, Anderson said a stronger dollar is contributing to lower fuel costs, resulting in more than $2 billion in savings this year.

Still, flagging currency in nations like Brazil and Japan and more tepid demand is leading the airline to reduce the number of seats it will fly to certain parts of the world after Labor Day.

"We are working through volatile currencies around the world,'' Anderson said in an earnings call Wednesday. "We are taking action to address these issues by reducing our international capacity by 3% year over year this winter.''

Reductions include a 15% to 20% cut in service from Japan, a 15% service cut to Brazil, and cuts between 15% to 20% to the Mid-East, India and Africa. There will be no flights at all to Moscow during the winter.

Ultimately, Anderson said in a statement that "we are looking at June quarter operating margins of 16 - 18% percent, with over $1.5 billion of free cash flow. These record results and cash flows show that the strong dollar is a net positive for Delta.''

Jim Corridore, equity analyst at S&P Capital IQ, trimmed his estimate for Delta's earnings per share this year to $4.71 from $4.94, but increased next year's earnings estimate to $5.75 from $5.57.

"We think a premium is warranted by DAL's better financial performance relative to peers and our view of strong cash generation, and use of such cash to pay debt, buy stock and fund dividends,'' Corridore said.

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