Delta Air Lines Slashes Its Third-Quarter Guidance

Delta Air Lines Slashes Its Third-Quarter Guidance

In recent years, Delta Air Lines (NYSE: DAL) has routinely posted stronger earnings results than its top rivals, American Airlines (NASDAQ: AAL) and United Continental (NYSE: UAL). Entering the third quarter, Delta expected to continue its run of strong profitability.

However, fuel prices have started to rise again, and airfares aren't increasing fast enough to keep pace. A recent price war sparked by United Continental is probably contributing to the ongoing weakness in domestic fares. As a result, Delta Air Lines just significantly reduced its third-quarter margin forecast.

Back in mid-July, Delta projected that it would earn a strong 18% to 20% operating margin (excluding special items) during the third quarter. That would have been roughly in line with its margin performance in the year-earlier period. Delta expected to offset its cost increases with a solid 2.5% to 4.5% uptick in passenger revenue per available seat mile (PRASM).

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Source: Fool.com