Delta Air Lines Unit Revenue Falls 1.5% in 1Q

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Delta Air Lines Inc (DAL) said Thursday that first-quarter unit revenue dropped as a stronger dollar hurt international demand and domestic bookings fell short of its expectations.

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The Atlanta-based carrier said unit revenue in the quarter declined 1.5 percent year-over-year. It also said it expects lower unit costs and a quarterly operating margin of 11.5 percent, excluding $300 million of early fuel hedge settlements, in line with guidance from a month earlier.

"The impact from currency fluctuations grew through the quarter, and additional domestic strength in March did not materialize to the extent expected," Delta said in a filing.

The airline said it expects unit costs excluding fuel and profit-sharing expenses for the quarter to be down 1 percent, compared to prior guidance that it would be flat.

The decrease was "driven by 0.8 points of benefit from foreign currency and the continued benefits from Delta's domestic refleeting and cost reduction initiatives," the filing said, referring in part to flying more people per plane by adding rows of seats.

Delta also expects that it paid less than previously forecast for fuel, which represents airlines' largest variable cost.

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It forecast its average price of fuel for the first quarter to be $2.90 to $2.95 per gallon, down from guidance a month ago of $2.92 to $2.97 per gallon.

Delta said it expects employee profit-sharing expenses to be $140 million. It expects an operating margin of 8 percent to 9 percent and system capacity up about 5 percent, in line with prior guidance.

Shares dipped more than 0.5 percent in morning trading.

(Reporting by Jeffrey Dastin in New York; Editing by Ted Botha)