Market Overview

Delta Sees Second-Quarter Loss on Fuel Hedges

Delta Airlines (NYSE: DAL) provided an update on its anticipated second-quarter performance on Tuesday. The company said that it now expects to post a loss in the period as plunging oil prices have saddled Delta with losses on its oil hedges. The airline said that it expects operating margins for the June quarter to be -1% when accounting for the hedges and other charges.

On an adjusted basis, Q2 margins are expected to be 8% to 10% versus 6.9% last year. The Wall Street Journal is reporting that other airlines with hedging programs are also expected to report mark-to-market losses on their hedges. Nevertheless, the plunge in the crude market on account of a very uncertain global economic environment is helping airline stocks.

Delta shares have added a little better than 13% over the last 3 months. The thinly traded Claymore/NYSE Arca Airline ETF (NYSE: FAA) is up around 4% during the same time period. Delta also said in the update that it expects revenue to be up 8% in the quarter versus last year. Investors are discounting the fuel hedges on Tuesday and seem to be focused on the company's adjusted guidance. DAL shares were last trading up 6% to $11.15.

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