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Delta Air Lines has warned it faces a drop in first quarter profits of more than a third, thanks to a sharp rise in fuel prices.
The Atlanta-based air carrier said its net profits for the first three months of this year were $603m, down from $946m in the same three months in 2016.
Revenues ticked down by 1.1 per cent to $9.1bn, matching Wall Street expectations. Unit revenues, which are closely watched by industry analysts, slipped 0.5 per cent, but capacity also declined by the same margin.
Delta’s adjusted fuel expense climbed by $327m year-on-year, as the average price for a gallon of fuel soared to $1.71, from $1.33.
Earnings per share, on an adjusted basis that excludes certain items, came in at 77 cents, exceeding expectations of 75 cents.
“Despite fuel price pressures, the Delta people once again delivered solid results across the board, with double digit operating margins, strong improvements in customer satisfaction, and progress on our international expansion with the closing of our Aeroméxico transaction,” said Ed Bastian, Delta’s chief executive.
The carrier added that it expects the severe weather at its Atlanta hub last week that led to cancellations of about 4,000 flights will likely reduce current quarter pre-tax income by $125m. Delta said that it expects second quarter passenger unit revenue to rise 1 – 3 per cent, with capacity flat or up 1 per cent.
The shares rose by 2.4 per cent in pre-market trading. As of Tuesday’s close, they were down by 7.9 per cent for 2017.
Big US carriers have been in the spotlight this week after a scandal erupted after video surfaced of a man being violently removed from a flight on United, one of Delta’s chief competitors.