Delta Air Lines Cuts Q2 Outlook After $450 Mln Fuel Hit

Delta Air Lines, Inc.

has cut its second quarter outlook after the it lost $450 million in fuel hedges. http://s1.q4cdn.com/231238688/files/doc_news/investor_updates/2016/June-Investor-Update-July-5_2016.pdf For the second quarter, Delta now expects operating margin of about 17 percent; cargo and other revenue of $1.5 billion; and average fuel price per gallon of $1.95 - $2.00. In an investor update, Delta reported that second quarter passenger unit revenue fell about 5 percent; CASM about flat with last year and system capacity was up about 3 percent. In April, Delta had guided for second quarter operating margin of 21-23 percent; Passenger unit revenue to drop 2.5-4.5 percent; fuel price of $1.48 - $1.53; CASM up about 2 percent; system capacity up 2-3 percent. Further, the company reported that consolidated passenger unit revenue (PRASM) for the month of June declined 5 percent due to close-in domestic yield weakness and continued pressures from foreign exchange. A CNN report said it's not all bad news for Delta as fuel prices are up 60 percent from their January lows, but they're down 20 percent from a year ago. So, even with the cost of canceling its fuel contract, Delta will save money on fuel, which is its second largest expense, in the second quarter. Citing company filings, CNN reported that Delta took an even bigger hit on hedges last year -- $2.3 billion. It lost another $274 million on hedges in the first three months of this year. http://money.cnn.com/2016/07/05/news/companies/delta-fuel-hedges/index.html?iid=hp-stack-dom At the time of writing, shares of Delta fell 1.97 percent to $34.92.