(Reuters) - Delta Air Lines Inc (DAL.N) slashed its full-year earnings forecast on Thursday as fuel costs in the second quarter surged 38.8 percent and the company said it expected $2 billion spike in its fuel bill in 2018.
The No.2 U.S.carrier by passenger traffic cut its full-year earnings outlook to a range of $5.35 to $5.70 per share from $6.35 to $6.70 per share.
Jet fuel costs for airlines have been rising as crude oil LCOc1 prices have soared 9.8 percent this year through Wednesday and 53.8 percent in the last 12 months.
However, strong travel demand and an increase in average fares helped the Delta’s second-quarter profit top Wall Street estimates.
Travel demand has remained robust, with global air passenger traffic growing every month this year through May as economic growth improves and customers benefit from tax cuts.
“With strong revenue momentum, an improving cost trajectory, and a reduction of 50-100 bps (basis points) of underperforming capacity from our fall schedule, we have positioned Delta to return to margin expansion by year end,” Chief Executive Officer Ed Bastian said.
The company’s net income fell to $1.03 billion, or $1.47 per share, in the second quarter, from $1.19 billion, or $1.62 per share, a year earlier.
The total unit revenue - a measure which compares sales with flight capacity - increased 4.6 percent in the quarter, boosted by higher average fares.
On an adjusted basis, the airline earned $1.77 per share, beating estimate of $1.72, according to Thomson Reuters I/B/E/S.
Delta’s total operating revenue rose 9.6 percent to $11.78 billion in the quarter.
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