Delta (DAL) Actually Beats Consensus...On Fuel-Hedging Gain

Delta Airlines (DAL) reported a $1.04 billion loss on $5.5 billion in revenue after surging fuel costs destroyed the carrier’s already thinning margins. DAL did, however, manage to blow away Street estimates and make a profit before goodwill-related charges. Adjusted EPS (excluding write-downs) came in at $0.35, well ahead of the $0.10 mean estimate

DAL realised a $330 million gain from fuel hedging and is expecting fuel costs to rise 11% in the next quarter. Delta also increased capacity, but is expecting major domestic cuts soon. WSJ:

Mainline revenue passenger miles, or one paying passenger flown one mile, rose 2.9%, as capacity increased 2.4%. In April, Delta forecasted capacity growth of 1% to 3%. The company didn’t give specific figures for Delta Airlines for load factor or revenue per available seat mile.

Looking ahead, Delta expects third-quarter mainline capacity flat, falling 11% to 13% domestically and jumping 17% to 19% internationally.

Delta is still waiting to complete a merger with Northwest (NWA), which analysts expect to go through by the end of the year. The $1.6 billion deal (originally valued at $3 billion before DAL stock dropped) is designed to help Delta realise economies of scale, to better manage rising fuel costs and declining domestic demand.

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