Delta sees solid third-quarter profit, notes rising fuel cost
(Reuters) - Delta Air Lines Inc (DAL.N) said on Thursday it expects a "solidly profitable" third quarter even as rising fuel prices pressure margins.
The U.S. carrier said it expects an operating margin of 9 percent to 11 percent for the third period, about one point lower than an earlier expectation, because of higher fuel costs, it told a Deutsche Bank investor conference.
U.S. airlines over the past two years have merged, cut back flights to match demand and added charges for baggage and food to boost profit. Delta and United Continental (UAL.N) both said capacity, or available seat miles, would fall for the remainder of the year.
But rising fuel costs could be a major wild card as travel goes into its typical seasonal slowdown in the fall. Oil prices moved higher on Thursday, with U.S. crude up 1.6 percent to $96.86 a barrel.
Atlanta-based Delta bought a Pennsylvania refinery earlier this year to gain more control over rising fuel costs, and expects annual savings of $300 million tied to the move.
But President Ed Bastian told the Deutsche Bank conference on Thursday that Delta's savings could prove to be greater as the carrier was looking to bring in Bakken crude from North Dakota to supply the refinery at prices that could be equivalent to West Texas Intermediate or lower. The refinery currently gets crude from across the North Atlantic.
Southwest Airlines Co (LUV.N) told the conference that while its planes continue to be full, the carrier has seen softness in yields, or revenue earned per seat.
"We have been aggressively pushing fares where we can," said Tammy Romo, Southwest's senior vice president of planning, who will become chief financial officer later this month.
Shares of Delta rose 4.3 percent to $9.26 and Southwest was up 2 percent to $9.27. Other airlines also rose with industry leader United Continental up 3.3 percent at $19.71 and US Airways Group (LCC.N) up 1.6 percent at $11.40.
(Reporting by Karen Jacobs in Washington; Editing by Gerald E. McCormick and Steve Orlofsky)
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