Delta Passenger Revenue Languishes; Profit Tops Expectations

Delta Air Lines Inc. on Thursday said it expects passenger unit revenue to fall in the current quarter after the key industry benchmark fell more than anticipated in the most recent quarter.

Still, the No. 2 air carrier by traffic saw its earnings in the first quarter beat expectations and shares, which have risen 6% over the past three months, added 1.3% premarket to $48.65.

Delta said it expects passenger unit revenue—which measures how much money airlines take in for each passenger flown a mile—to fall 2.5% to 4.5% in the second quarter.

"While this is an improvement over our March quarter performance, we are focused on getting unit revenues back to a positive trajectory and we will make adjustments to our fall capacity levels if we are not making sufficient progress over the coming months," said Glen Hauenstein, Delta's incoming president.

In the most recent quarter, passenger unit revenue fell 4.6%, including a 2 point foreign-currency dent, and worse than the airline's anticipation for a 2.5% to 4.5% decline.

Over all for the quarter, Delta reported a profit of $946 million, or $1.21 a share, up from $746 million, or 90 cents, a year earlier. Excluding certain items, earnings rose to $1.32 a share from 45 cents in the year-earlier quarter.

Revenue edged down 1.5% to $9.25 billion, pressured $125 million by foreign currency exchange and $5 million by the deadly terrorist attack in Brussels.

Analysts polled by Thomson Reuters had forecast adjusted earnings of $1.30 on $9.27 billion in revenue.

Delta's fuel price for the quarter ended in March was $1.33 a gallon, down sharply from $2.93 a gallon a year earlier. Overall fuel expense declined 34% to $1.39 billion during the period. The airline industry has broadly benefited from lower jet-fuel prices as the price of oil continues to sink, propping up profits.

For the current quarter, the airline estimates fuel costs between $1.48 and $1.53 and system capacity will rise 2% to 3%.

"The March quarter represented the peak of our nonfuel cost pressures for the year and we expect our performance will improve as we move through the remainder of the year, allowing us to achieve our goal of keeping our nonfuel unit cost growth below 2%," said Chief Financial Officer Paul Jacobson.

Capacity increased 2.7%, in line with expectations.

Delta nosed ahead of United Continental Holdings Inc. in 2015 to become the nation's No. 2 airline, adding a flourish to the Atlanta-based carrier's strong performance in recent years.

Write to Anne Steele at [e-mail]

(END) Dow Jones Newswires

April 14, 2016 08:25 ET (12:25 GMT)

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