Delta Air Lines the No. 1 U.S. carrier by sales, said in a regulatory filing that revenue and profit should rise this quarter, aided by stronger business travel and expansion of its number of flights to New York.
But it said it expects to record losses from fuel hedging due to declining oil prices and charges for staff cuts.
Airlines recently surged into the top 10 among the 197 industries that IBD tracks amid the slide in oil prices. U.S. oil prices have fallen to around $79 a barrel since peaking at $110 in March.It's unclear though whether renewed growth in the group has generated confidence among airlines that will lead to lower ticket prices, possibly triggering a virtuous cycle of even higher growth as passenger traffic rises.
Delta on Monday became the first U.S. airline to enter the fuel business as it closed its purchase of an oil refinery in Philadelphia from ConocoPhillips . Delta paid $150 million for the facility, and said it will spend another $100 million to convert it to provide jet fuel. The deal was announced April 30.
Still, shares of the No. 1 U.S. airline by revenue surged as much as 6.3% in afternoon trading to 11.18 amid a broad advance in the Transportation-Airlines group. The No. 9 airlines group was ranked No. 21 four weeks ago, and a weak No. 130 13 weeks ago.
No. 2 United Continental rose 2.4% to 24.20 in afternoon trading. Highly rated discounter Spirit Airlines whose stock has a best-possible 99 Composite Rating, rose 3.4% to 20.08, while rivals Copa Holdings rose 3% to 83.18 and Allegiant Travel rose 3% to 71.04.
Delta said it expects an operating margin of 8% to 10% this quarter, up from 6.9% a year earlier. But due to adjustments for fuel hedges it recorded in the quarter and $170 million for voluntary retirement and severance charges, it forecasts an operating margin of roughly -1%.
The company said the rapid slide in jet fuel prices changed the value of its open fuel hedges, which run through June 2013. Delta expects a $155 million loss for fuel hedges that settle in the second quarter.