Delta 1Q Results Slammed by Rising Oil Prices

Hurt by higher fuel prices that more than offset improved sales, Delta Air Lines (NYSE:DAL) revealed a widened first-quarter loss, forcing it to slash capacity by 3% for the post-summer season.

The Atlanta-based airline posted a net loss of $318 million, or 38 cents a share, compared with a loss of $256 million, or 31 cents a share, in the same quarter last year, ahead of average analyst estimates polled by Thomson Reuters of a 50-cent loss.

Revenue for the three months ended March 31 was $7.7 billion, up 13% from $6.8 billion a year ago, beating the Street’s view of $7.61 billion. Passenger revenues were impacted by severe winter weather and tragic events in Japan, though cargo revenues climbed 42% to $74 million on stronger volumes.

The company attributed the quarterly loss to a 30% rise in fuel prices, which amounted to an impact of $610 million. In an effort to tackle ever-growing increases in oil costs, the jet operator said it is rolling out several initiatives, including raising domestic fares and international fare subcharges.

Delta also plans on slashing its capacity for the second-half of 2011, targeting those areas where revenue improvements have not been able to keep up with higher prices. In doing so, the company expects system capacity for the post-Labor Day period to be down about 3% from the year-earlier period.

“Fuel is the biggest challenge facing this industry and Delta is actively reducing capacity, implementing fare actions, hedging our fuel needs and attacking our cost structure in order to offset fuel’s impact on our earnings,” Delta CEO Richard Anderson said in a statement.

Despite its cautious approach, Delta said it expects to book double-digit unit revenue growth for the June quarter. Ed Bastian, Delta’s president, said the company believes its aggressive fare actions coupled with its capacity reductions will help Delta recover the higher fuel costs in its ticket prices.