Reuters: Hot Stocks: UPDATE 1-Delta cuts first-quarter revenue forecast, shares fall

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UPDATE 1-Delta cuts first-quarter revenue forecast, shares fall Apr 2nd 2013, 17:57 Tue Apr 2, 2013 1:57pm EDT * Carrier cites less last-minute government travel * Delta's pricing may have been too aggressive -analyst * Shares fall 7 pct, other airline stocks also weak (Adds analyst comment, updates stock prices) April 2 (Reuters) - Delta Air Lines Inc on Tuesday curbed its growth forecast for a key revenue measure for the first quarter, saying March demand was hurt by lower last-minute travel from government clients in the wake of U.S. budget pressures. The news sent Delta's shares down 7 percent and also hurt other airline stocks. Some analysts said the sell-off appeared to be overdone because Delta's profit picture was largely unchanged. Delta said that unit revenue, a measure of pricing power and the extent to which planes are filled, rose at a lower pace in March than in the previous two months. Delta's unit revenue last month rose 2 percent, compared with a rise of 5 percent in February and 5.5 percent in January. The March performance was hurt by less last-minute travel from government clients, lower than expected demand and temporary inefficiencies as Delta rolled out new revenue management technology. "Government contractors are a strong source of business travel revenue and to the extent that those contractors believe that the sequester will impact business, they probably will cut back on travel," said Robert Mann, an airline consultant in Port Washington, New York. "Whether it will be displaced to a future period" is uncertain. Mann said he was more concerned that Delta indicated demand fell in March, which included the Easter holiday this year. "Delta has either stubbed its toe with the revenue management technology or has become a little too aggressive on pricing." In an investor update filed on Tuesday, Delta said it now expects a rise of 4 to 4.5 percent in first-quarter unit revenue from the year earlier. That compared with a prior view of a rise of 4.5 to 5.5 percent for the quarter. In March, Delta said gains in trans-Atlantic and Latin American regions were partly offset by a weakening yen in the Pacific region. Last week, United Continental said it expected first-quarter unit revenue to rise between 5.4 percent and 6.4 percent. Delta said it still expects a profitable first quarter, and kept its operating margin forecast intact at 2.5 to 3.5 percent. Despite the lighter forecast for quarterly unit revenue, which is also known as passenger revenue per available seat mile, Delta said non-fuel costs would rise less than its prior view. A Delta spokesman declined to comment further on the carrier's outlook. System traffic at Delta rose 0.1 percent in March as the number of passengers boarded fell 0.7 percent in the month. Shares of Delta were down 7 percent at $15.12 on Tuesday afternoon on the New York Stock Exchange. Other U.S. airlines were also lower, with shares of United Continental Holdings down 3.6 percent at $29.84, and US Airways Group off 3.8 percent at $16.03. (Reporting by Karen Jacobs in Atlanta; editing by Matthew Lewis) Link this Share this Digg this Email Reprints

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