ATLANTA, Sept 14 (Reuters) - Delta Air Lines Inc, the world's biggest airline, on Monday boosted its operating margin forecast for the third quarter, citing lower fuel costs, and said other financial measures were trending in line with or better than year-earlier and second-quarter levels.
Delta's shares rose nearly 7 percent as stocks of other U.S. carriers gained. UAL Corp, the parent of United, shot up more than 10 percent.
'We continue to believe that airlines are in the process of turning a financial corner, with steady guidance disappointment yielding to slight improvement, and seemingly endless negative demand rhetoric yielding to gradual--if slight--sequential improvement,' J.P. Morgan analyst Jamie Baker said in a note to clients on Monday.
In a Securities and Exchange Commission filing, Delta said it expects operating margin of 3 percent to 4 percent for the third quarter, and break-even operating margin for the full year.
In late July, Delta projected third-quarter operating margin of 1 percent to 3 percent.
The higher forecast is a positive, said Basili Alukos, a Morningstar analyst.
'All the airlines have improved, mostly from a cost perspective, just because fuel has fallen significantly and they've cut capacity,' Alukos said.
Atlanta-based Delta, which acquired Northwest Airlines last year, and other carriers have been cutting capacity and jobs to control costs as the recession hurt air travel.
Helane Becker, an analyst with Jesup & Lamont Securities on Monday raised her third-quarter earnings estimate for Delta from a loss of 30 cents a share to a profit of 5 cents a share and reiterated her 'buy' rating on the stock.
She said Delta's projected load factor performance suggested bookings are strengthening. 'We believe that business traffic is starting to return to the market,' Becker added in a research note.
Delta said load factors -- the percentage of seats filled on planes -- were expected to be about 82 percent for September and October, in line with or slightly above year-earlier levels.
The airline also said revenue per available seat mile, an important measure, would show a smaller decline in the third quarter than in the second quarter.
The airline said it expects a consolidated fuel price, net of hedges, of $2.14 per gallon for the third quarter, $2.05 for the fourth quarter, and $2.13 for the full year. In July it forecast $2.17 for the third quarter.
Delta also said it expects 2010 pension funding to rise $450 million from 2009, which is estimated to be $200 million. It said that financial market weakness in 2008 hurt the value of pension assets.
Delta shares closed up 54 cents, or 6.7 percent, to $8.60 in New York Stock Exchange trading.
(Reporting by Karen Jacobs and Deepa Seetharaman; editing by John Wallace) Keywords: DELTA/ (karen.jacobs@thomsonreuters.com; +1 404 493-3656; Reuters Messaging: karen.jacobs.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Delta's shares rose nearly 7 percent as stocks of other U.S. carriers gained. UAL Corp, the parent of United, shot up more than 10 percent.
'We continue to believe that airlines are in the process of turning a financial corner, with steady guidance disappointment yielding to slight improvement, and seemingly endless negative demand rhetoric yielding to gradual--if slight--sequential improvement,' J.P. Morgan analyst Jamie Baker said in a note to clients on Monday.
In a Securities and Exchange Commission filing, Delta said it expects operating margin of 3 percent to 4 percent for the third quarter, and break-even operating margin for the full year.
In late July, Delta projected third-quarter operating margin of 1 percent to 3 percent.
The higher forecast is a positive, said Basili Alukos, a Morningstar analyst.
'All the airlines have improved, mostly from a cost perspective, just because fuel has fallen significantly and they've cut capacity,' Alukos said.
Atlanta-based Delta, which acquired Northwest Airlines last year, and other carriers have been cutting capacity and jobs to control costs as the recession hurt air travel.
Helane Becker, an analyst with Jesup & Lamont Securities on Monday raised her third-quarter earnings estimate for Delta from a loss of 30 cents a share to a profit of 5 cents a share and reiterated her 'buy' rating on the stock.
She said Delta's projected load factor performance suggested bookings are strengthening. 'We believe that business traffic is starting to return to the market,' Becker added in a research note.
Delta said load factors -- the percentage of seats filled on planes -- were expected to be about 82 percent for September and October, in line with or slightly above year-earlier levels.
The airline also said revenue per available seat mile, an important measure, would show a smaller decline in the third quarter than in the second quarter.
The airline said it expects a consolidated fuel price, net of hedges, of $2.14 per gallon for the third quarter, $2.05 for the fourth quarter, and $2.13 for the full year. In July it forecast $2.17 for the third quarter.
Delta also said it expects 2010 pension funding to rise $450 million from 2009, which is estimated to be $200 million. It said that financial market weakness in 2008 hurt the value of pension assets.
Delta shares closed up 54 cents, or 6.7 percent, to $8.60 in New York Stock Exchange trading.
(Reporting by Karen Jacobs and Deepa Seetharaman; editing by John Wallace) Keywords: DELTA/ (karen.jacobs@thomsonreuters.com; +1 404 493-3656; Reuters Messaging: karen.jacobs.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.