Delta Air Lines Inc.’s share price up, forecasts increasing 2015 profit due to lower fuel prices

The third-largest airline in the U.S., Delta Air Lines Inc., projected that its profit over the upcoming year would be boosted by declining fuel prices. However, the company said that lower prices could also have a negative effect, forcing it to give up from a total of $1.2 billion from fuel hedging.

Delta Air forecast a fuel benefit estimated to about $1.7 billion, even when taking into account hedging losses. The company said that it expects an annual pre-tax profit at the amount of more than $5 billion in 2015. In comparison, its projection regarding 2014 pointed to $4.5 billion in profit before tax.

As reported by Bloomberg, the Chief Executive Officer of Delta Air, Richard Anderson, told investors at a presentation, which took place in New York: “2015 should be a fantastic year.”

The carrier has chosen to follow an unusual approach when it comes to managing fuel prices by acquiring Trainer oil refinery, which is situated near Philadelphia.

In addition, Delta Air has decided to keep older aircraft in comparison to other U.S.-based airline carriers, demonstrating belief that it is able to maintain the passenger jets in a more reliable way than its competitors.

The Chief Financial Officer of Delta Air, Paul Jacobson, said that the companys strategies were proving to be successful. Mr. Jacobson said in a statement, cited by the Financial Times: “I think we’re on a strong path. We’ve created a lot of value. We have a lot more value to create.”

Delta Air projected that fuel prices will fall from the range between $2.69 and $2.74 a gallon it had projected to pay in the current quarter to the range between $2.40 and $2.50 a gallon in 2015. The CEO Anderson also projected that at least $1.5 billion are to be returned to investors in 2015, boosting the airline carriers projection for the fourth-quarter operating margins. The fourth-quarter operating margins are expected to be within the range from 11.5% to 12.5%, according to Andersons statement.

Delta Air Lines Inc. was up 4.57% to close at $48.33 per share yesterday, marking a one-year increase of 74.73%. The company is valued at $38.68 billion. According to CNN Money, the 17 analysts offering 12-month price forecasts for Delta Air Lines have a median target of $56.00, with a high estimate of $73.00 and a low estimate of $45.00. The median estimate represents a +15.87% increase from the last price of $48.33.