Delta Misses as Fuel Costs Rise

ATLANTA ( TheStreet) -- Delta ( DAL) narrowly missed estimates after fuel expenses increased by $1 billion.

Excluding items, the carrier reported net income of $765 million, or 91 cents a share. Analysts surveyed by Thomson Reuters had estimated 93 cents. Revenue rose 10% to $9.8 billion; analysts had estimated $9.7 billion.

With items, primarily including $216 million for a mark-to-market fuel hedge cost adjustment, Delta earned $549 million, or 51 cents a share, compared with $363 million, or 43 cents a share, in the same period a year earlier.

"We are successfully adapting Delta to the challenging economic environment by producing a solidly profitable quarter in the face of $1 billion of fuel price pressure," said CEO Richard Anderson in a prepared statement, referring to the additional cost of fuel compared with fuel prices in the same quarter a year earlier.

During the quarter, passenger revenue per available seat mile rose 11%, led by a 13% RASM gain in Latin America and a 12% domestic gain. "Our September quarter passenger unit revenue increase of 11% from prior year, a revenue premium to the industry," said President Ed Bastian. "Corporate travel demand remains strong. "

On the cost side, cost per available seat mile excluding fuel and special items rose 3.3% over the same quarter a year earlier. "We are beginning to gain traction with our cost reduction initiatives, slowing September quarter non-fuel cost growth to 3% on a 1% decline in capacity," said Chief Financial Officer Hank Halter.

As of Sept. 30, Delta had $5.1 billion in unrestricted liquidity, including $3.3 billion in cash and short-term investments and $1.8 billion in undrawn revolving credit facilities.

The carrier expects to report an operating margin between 5% and 7% in the current quarter, when capacity is expected to decline by 4% to 5% including an international decline of 4% to 6%.

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

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