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Bloomberg
Delta Air Lines Inc. cut its forecast for a key revenue figure after fares failed to rebound as quickly as the company had expected. Airline stocks fell.
Passenger revenue for each seat flown a mile — a closely watched measure of pricing power — will be flat this quarter, the Atlanta-based carrier said in a presentation. That marked a reduction from Delta’s outlook in January, when it said the benchmark gauge known as unit revenue could rise as much as 2 percent after two years of declines.
US airlines have been cutting back on the growth of flights and seats in an effort to regain some pricing power over fares. Delta also lowered its outlook for operating profit margin to 10 percent to 11 percent in the first quarter from an initial forecast of 11 percent to 13 percent.
“The good news is we do expect this to be the trough for the full year in terms of year-over-year margin performance,†Chief Financial Officer Paul Jacobson said at a Raymond James Financial conference. “And while unit revenues are tracking on the low end of our original guide at flat versus up 0 percent to 2 percent, we still believe that we’re on that trajectory.â€
Delta fell 2.4 percent to $48.91 at 10:05 a.m. in New York after dropping as much as 2.7 percent for the biggest intraday decline in five weeks. United Continental Holdings Inc.slid 2.7 percent and American Airlines Group Inc. decreased 3 percent.
Fuel costs are up $20 a barrel over a year ago, adding to higher expenses from a new pilot contract, Jacobson said. Delta said last week that February unit revenue was unchanged, short of what some analysts had expected.
Airlines are also contending with the aftermath of President Donald Trump’s executive order in January barring entry to the U.S. by refugees and people from seven predominantly Muslim countries. While the measure was temporarily blocked by courts, the administration is set to issue a revised initiative on Monday. The new restrictions are expected to exempt Iraq.