Delta anticipates strong Q2 margin

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Delta Air Lines anticipates that its profit margin will grow by up to 11% in the second quarter, as revenue remains stable and fuel costs decline.

"Our revenue environment I'd characterise that as stable, however, it's stable in light of a declining fuel environment," says Ed Bastian, president of the Atlanta-based carrier, at the Deutsche Bank 2013 Global Industrials and Basic Materials Conference today. "Which means it's an environment with really nice margin expansion for Delta."

Delta anticipates its fuel costs to be between $3 and $3.05 per gallon after taxes and hedges for the quarter, which is down more than 10% versus the second quarter 2012, he says.

The 10% to 11% margin expansion is in the high end of the 9% to 11% increase guidance that the airline released in April.

Costs per available seat mile (CASM) excluding fuel are expected to increase 3% to 4% in the second quarter, which is down from guidance of a 4.5% to 5.5% increase in April.

Demand remains relatively flat. Passenger revenue per available seat mile (PRASM) was down 2% in April and up 0.5% in May, which compares to an 11% increase in April 2012 and 6% increase in May 2012.

Capacity guidance remains flat to up 1% for the quarter. However, Bastian says that the airline could post some "modest" capacity increases during peak periods in the third quarter to meet demand.