Delta hones Q3 guidance, PRASM growth slows

Washington DC
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Delta Air Lines anticipates that unit revenues will grow by only 3% in the third quarter compared to a year earlier, in an investor update today.

The Atlanta-based SkyTeam carrier had previously expected that passenger revenue per available seat mile (PRASM) would increase by between 3% and 4% during the period. It grew by only 0.5% during September.

Unit revenues grew 8.5% during the quarter ending 30 June versus 2011.

Delta anticipates that system capacity declined by 1% to 2% during the quarter compared to a year earlier. Domestic capacity was either flat to down 1% and international capacity was down between 3% and 4%.

The airline reported that system capacity would decline by 3% to 4% over the period, in September. It previously disclosed that the largest cuts would be in Atlantic and Pacific flying.

Costs per available seat mile excluding fuel are expected to rise by 5% during the quarter compared to a year earlier.

Delta anticipates that it will pay an adjusted average of $3.15 per gallon of jet fuel in the third quarter. Previous guidance anticipated $3.09 per gallon but oil prices rose towards the end of the quarter.

The five-day moving average price of jet fuel was about $130 per barrel at the end of September, according to industry body Airlines for America. This is up about a fifth from roughly $110 per barrel at the beginning of the quarter.

Delta paid an average of $3.37 per gallon for jet fuel during the second quarter.

The airline anticipates $400 million to $450 million in capital expenditure in the quarter ending 30 September. This includes the cost of retrofits to the Trainer refinery, which began operations at the end of the quarter.

Delta expects an operating margin of between 10% and 11% for the period, which is in the high end of its previous guidance of between 9% and 11%.