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A Delta Air Lines flight is pushed put of its gate at the airport in Salt Lake City, Utah, on Jan. 12, 2018.Mike Blake/Reuters

Shares of Delta Air Lines Inc fell about 9 per cent on Thursday, after the U.S. carrier warned fourth-quarter unit revenue would be slightly below its prior forecast due to the lower-than-expected improvement in last-minute fares booked by travellers.

The No. 2 U.S. airline said it now expected total revenue per available seat mile (TRASM) – a closely followed measure of airline performance – to rise about 3 per cent, less than the 3.5 per cent growth it forecast earlier.

“While close-in yield momentum continues, the pace of improvement in late December was more modest than anticipated,” Delta said.

Shares of bigger rival American Airlines Group Inc fell 7.5 per cent. Smaller carriers United Continental Holdings Inc slid 5 per cent, Southwest Airlines Co closed down 3.2 per cent, and JetBlue Airways Corp slid 1.7 per cent.

The broader U.S. markets slumped 2 per cent as weak U.S. factory data and the fallout of a rare sales warning from Apple Inc fanned fears of slowing growth.

“The unit revenue guide-down is the second time Delta lowered RASM forecast in the past two months,” Cowen & Co analyst Helane Becker said in a note.

“Investors are concerned that RASM will continue to weaken in 2019, although we believe other airlines are not necessarily seeing the same pressure as Delta.”

Becker, rated 5 stars by Refinitiv for estimate accuracy on Delta, lowered her price target to $65 from $67, but maintained an “outperform” rating.

Atlanta-based Delta also said it expects fuel price per gallon to be in the range of $2.38 to $2.43, about 10 cents below its earlier guidance.

In the past, airlines have competed away gains from lower fuel by rewarding flyers with lower fares.

“With oil trending lower in recent months, investors are worried this time will not be different,” said Becker.

Airlines also take advantage of lower fuel costs to add more flights and seat capacity, a measure that can also drive down unit revenue.

Delta last month forecast 2019 revenue and profit below analysts’ estimates.

The airline said it expected revenue to rise about 4-6 per cent in 2019, compared with an average 5.6 per cent increase forecast by Refinitiv data.

The company’s profit estimate of $6-$7 per share also fell short of analysts’ average expectation of $6.70.

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Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 17/05/24 4:00pm EDT.

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Delta Air Lines Inc
American Airlines Gp
United Airlines Holdings Inc
Jetblue Airways Cp
Southwestern Energy Company

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