Delta Air sticks to first-quarter profit forecast, raises revenue expectations

A Delta Air Lines plane takes off from Hartsfield-Jackson Atlanta International Airport in Atlanta. (AP Photo/Brynn Anderson, File)

Delta Air said on Tuesday it expects first-quarter profit within its initial forecast range but raised its revenue expectations on strong demand, amid high jet fuel prices due to the conflict in the Middle East.

Rising jet fuel prices, up more than 50 per cent since U.S. and Israeli strikes on Iran in late February, have cast a shadow ahead of the upcoming summer travel season that is expected to pave the way for a recovery for U.S. carriers.

Delta said consumer and corporate demand trends have improved into March with strength across its main, premium and loyalty revenues.

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Shares of the carrier rose 3.55 per cent in premarket trading.

Delta now expects first-quarter revenue to grow at a high-single-digit percentage, compared with its earlier forecast of five per cent to seven per cent.

The company had forecast adjusted profit per share in the range of 50 cents to 90 cents.

Delta said it was well-positioned to navigate the current environment and was ready to tweak its capacity if fuel prices stay elevated.

Fuel is the second-largest expense for air carriers after labor, typically accounting for a fifth to a quarter of operating expenses.

Jet fuel prices have been trading between US$150 and $200 per barrel, compared with about $100 per barrel before the war. Iranian strikes across the major oil-producing region have disrupted supplies and shut key shipping routes.

Budget carrier Frontier Airlines on Tuesday also slightly narrowed its quarterly loss forecast, as strong demand helped offset the spike in jet fuel prices.

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Frontier, however, put its full-year forecast under review as long-term cost outlook becomes increasingly uncertain.

Meanwhile, JetBlue Airways said it expects first-quarter unit revenue to rise five per cent to seven per cent, up from its prior forecast of flat to four per cent growth, citing strong demand, while warning of rising fuel costs.

U.S. airlines are more exposed to the price shock as most do not hedge fuel, compared with some European and Asian peers.

Analysts say any hit to margins will also depend on the conflict’s duration and the ability of individual airlines to offset rising costs.

(Reporting by Shivansh Tiwary and Nathan Gomes in Bengaluru; Editing by Sriraj Kalluvila)