UPDATE 2-Delta posts profit, sees U.S. budget cuts hurting April

Tue Apr 23, 2013 9:54am EDT

* First-quarter adjusted profit 10 cents vs. estimate 6 cents

* Budget cuts seen hurting April unit revenue

* Shares up 4.2 pct

April 23 (Reuters) - Delta Air Lines Inc on Tuesday reported a higher-than-expected first-quarter profit as revenue rose, and its shares gained 2.3 percent.

The carrier forecast a positive operating margin for the current quarter but added that federal budget cuts and lighter demand from leisure travelers were expected to hurt a key revenue measure in April.

Passenger revenue per available seat mile, an important measure, will likely fall 2 percent to 3 percent this month, Delta said. For the first quarter, that revenue gauge was up 4 percent.

Still, Delta said it expected declining oil prices to help offset the near-term revenue weakness.

"While we are seeing some revenue softness, we are also benefitting from lower fuel costs, allowing us to continue our path of margin expansion even in a sluggish economic environment," President Ed Bastian said in a company statement.

Excluding items, first quarter results topped estimates.

Delta has been upgrading aircraft seats and expanding food and entertainment options to entice passengers to spend more. It has also launched partnerships with non-U.S. airlines and expanded flights in key business markets such as New York to position itself to gain new passengers.

Net income was $7 million, or 1 cent a share, for the first quarter, compared with $124 million, or 15 cents a share, a year earlier.

The latest quarter had various special items, including a $24 million gain tied to fuel-hedge contracts and a cost of $102 million related to assets such as planes and facilities.

Excluding items, profit came to 10 cents a share, compared with 6 cents expected by analysts on average, according to Thomson Reuters I/B/E/S.

Though operating revenue rose 1 percent to $8.5 billion, expenses rose 3 percent, with costs for salaries rising 8 percent. Interest expense and amortization also hurt profit.

Operations at the Pennsylvania refinery Delta bought last year had a loss of $22 million in the quarter, hobbled by various factors including problems with supply in the wake of last year's Superstorm Sandy.

Shares of Delta were up 4.2 percent to $15.78 in morning trading.

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