UPDATE 1-Delta says lower fuel prices to aid second quarter

Thu Jun 13, 2013 4:00pm EDT

* Southwest expects lower unit revenue

* Both carriers seen posting higher Q2 profits

June 13 (Reuters) - Delta Air Lines said on Thursday it expects improved profit in the second quarter as declining fuel prices boost margins.

"June is shaping up to be a strong quarter," Delta President Edward Bastian told a Deutsche Bank investor conference. He said the airline expected operating margin at the high end of an April forecast of 9 percent to 11 percent.

Meanwhile, Southwest Airlines Co said it expects an important revenue measure to decline in the second quarter, saying it is having to work harder to stimulate traffic.

Chief Financial Officer Tammy Romo told the Deutsche Bank conference that passenger revenue per available seat mile, which is also known as unit revenue, would fall in the low-single-digit percentage range in the current quarter compared with a year ago.

"Revenue trends since March have been softer than we anticipated," Romo said during the conference, which was broadcast over the Internet.

Analysts currently expect both airlines to post higher profit for the second quarter compared with a year earlier, according to estimates from Thomson Reuters I/B/E/S.

U.S. airlines have reported weaker unit revenue, a measure of how full planes are and pricing power, in recent months as demand softened. Some carriers have said effects of automatic federal spending cuts under the U.S. sequestration process and the weaker yen have been factors in the weaker performance.

Unit revenue at Southwest, which offers fewer international flights than Delta, fell 4 percent to 5 percent in April and was down about 2 percent in May.

Southwest's Romo added that while bookings for June were good, the company was cautious about summer demand and potential effects from the U.S. budget cuts and higher taxes.

Delta said it expected unit revenue for the month of June to be flat or rise as much as 1 percent. That would compare with a rise of 0.5 percent it had in May.

Delta shares were up 3.3 percent to $18.66 in late afternoon trading, while Southwest was up 1 percent to $14.01.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.