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Delta Says Record Second Quarter Is Driven by Lower Fuel Cost

ATLANTA ( TheStreet) -- Delta (DAL - Get Report) reported a record second-quarter profit, driven by lower fuel costs.

Excluding special items, the company earned $844 million, or 98 cents a share. Analysts surveyed by Thomson Reuters had estimated 95 cents. Revenue rose 0.7% to $8.5 billion.

Including special items, Delta earned $685 million, or 80 cents a share.

"Our June quarter operational and financial performance is among the best in Delta's history," said CEO Richard Anderson, in a prepared statement. "We have significant opportunities ahead of us to expand margins, cash flows and profitability (with) initiatives like our new Terminal 4 at JFK, the Virgin Atlantic joint venture, and our quarterly dividend and share repurchase program."

During the quarter, passenger revenue per available seat mile was flat. Mainline PRASM showed slight gains in the domestic market and the three international regions, but regional carrier revenue declined by 2.3%.

"The combination of strong operational performance and the success of our revenue and sales initiatives once again allowed Delta to outperform the industry in the second quarter," said President Ed Bastian. "Looking forward, we expect demand trends to remain solid which will lead to continued margin expansion against a backdrop of lower year-over-year fuel prices."

On the cost side, cost per available seat mile excluding fuel, profit sharing and other special items rose 2.5%, driven by the impact of wage increases and operational and service investments. Including items, CASM fell 9%, driven by lower fuel costs. Fuel expense declined by $710 million or $288 million excluding mark-to-market adjustments resulting from lower fuel prices and prior year hedge losses.

"Our June quarter non-fuel unit cost increase of 2.5% was a full two points lower than our guidance at the start of the quarter and we expect that positive trend to continue in the September quarter," said CFO Paul Jacobson. "The success we have had with our structural cost initiatives should result in non-fuel CASM growth for the remainder of the year at less than 2%, setting a solid foundation for upholding our long-term goal of keeping our cost growth below 2% annually beyond 2013."

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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