Delta Ekes Out Small 1Q Profit on Higher Air Fares

delta air lines earnings
Ted S. Warren/AP

MINNEAPOLIS -- Delta Air Lines said government spending cuts and weak demand from vacationers are hurting revenue this month.

Lower fuel prices should help to offset the decline, the airline said on Tuesday.

Automatic government spending cuts that took effect last month have been cutting into air travel at some airlines. Delta said demand from last-minute travelers -- a category that can include people flying on government business -- began to fall in the last part of March, and that demand from leisure travelers is softer, too.

Delta Air Lines Inc. (DAL) said per-seat revenue will fall 2 percent to 3 percent this month.

In response, the airline has been keeping a lid on flying, aiming to charge more for the seats that it does offer to passengers. During the first quarter, it cut flying capacity by 3 percent. It said capacity will be flat to up 1 percent in the second quarter.

The world's second-biggest airline earned $7 million, or a penny a share, for the quarter that ended March 31. Not counting special items, it would have earned $85 million, or 10 cents a share -- better than analysts had been expecting. The company reported net income of $124 million in the year-ago quarter, but excluding special items it lost $39 million, or 5 cents a share.

Revenue rose 1 percent to $8.5 billion, matching analyst expectations.

The first three months of the year are often money-losers for airlines. Delta says this was its best first-quarter operating profit in more than a decade.

Yield, which is one way to measure fares, rose 2.1 percent.

Delta's oil refinery near Philadelphia lost $22 million because of ongoing supply disruptions from Superstorm Sandy and an outage in its gasoline production unit.

(Updated at 9:59 a.m. ET)

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John Simons

The ongoing unrest in North Africa is the major reason for a rise in the fuel prices, which contribute nearly 30 % of the total cost for airlines. Delta took advantage of the rising consumer revenues to hedge against the rising fuel prices, not to mention cutting wages.

October 24 2013 at 12:38 PM Report abuse rate up rate down Reply