Delta Air Lines Inc. said Wednesday that lower fuel prices led
to better-than-expected earnings in its June quarter, though unit
revenue fell more than the company had forecast.
Shares increased about 3% in premarket trading.
U.S. airline stocks have been volatile, and investors had bid
them up for most of the past year on hopes the companies would
continue reaping the benefits of cheap fuel without engaging in the
competition that has hurt their profits in the past.
Delta has continued to benefit from sharply falling oil prices.
Fuel expense in the latest quarter fell $463 million from the year
before due to a 39% drop in market fuel prices that helped offset
nearly $600 million in settled hedge losses.
For the latter half of 2015, the company expects fuel price of
$1.90 to $2 a gallon, down from $2.65 a year earlier. For the
current quarter, the company expects 30% fuel savings.
Meanwhile, Delta said its passenger unit revenues fell 4.6% on a
3.9% decline in yields. The carrier in July had forecast a 4.5%
unit-revenue decline.
Unit revenue is a closely watched airline metric that measures
revenue per seat flown a mile. It has been expected to decline for
virtually all U.S. carriers in the second quarter because of
heightened capacity, softened domestic demand and foreign-exchange
pressures.
On Wednesday, Delta said it expects unit revenue to fall 4.5% to
6.5% in the current quarter.
Delta President Ed Bastian said that "unit revenue growth is an
important component of our long-term plan to expand margins." The
company expects flat system capacity growth for the fourth quarter
of 2015, "a level in line with current demand expectations, which
should put the business on the right trajectory to stem the erosion
in unit revenues by the end of the year," he said.
Delta also forecast capacity growth of about 3% in the third
quarter compared with the year-earlier period.
The Justice Department recently said that it is investigating
whether U.S. airlines, including Delta, colluded on expansion
plans, amid concerns from consumer advocates and politicians that
the industry is trying to extend its recent run of prosperity by
controlling capacity to keep airfares high.
Overall, Delta reported $1.49 billion of earnings, or $1.83 a
share, up from $801 million, or 94 cents a share, a year earlier.
Excluding special items, per-share earnings were $1.27 a share.
Revenue rose to $10.71 billion from $10.62 billion.
Analysts had expected earnings of $1.21 a share on sales of
$10.65 billion.
Write to Angela Chen at angela.chen@wsj.com
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