(Reuters) - U.S. carrier Delta Air Lines Inc (DAL.N) reported a higher-than-expected fourth-quarter profit on Tuesday, aided by lower fuel costs and higher fares.
Delta, now the third-largest U.S. airline behind the newly merged American Airlines Group Inc (AAL.O) and United Continental Holdings Inc (UAL.N), said it expected margins to widen in the current period. It forecast an operating margin of 6 percent to 8 percent for the first quarter. Helane Becker, a Cowen & Co airline analyst, estimated a 5.4 percent operating margin for Delta for the first quarter.
Shares rose 4.6 percent to $32.50 in early trading.
Passenger revenue gains were strongest in the United States and Latin America, helped by holiday travel.
Fourth-quarter net income totaled $8.5 billion, or $9.89 a share, including a noncash gain of $8 billion from a tax benefit. A year earlier it had a profit of $7 million, or 1 cent a share.
Excluding items such as the tax benefit, profit was $558 million, or 65 cents a share in the latest period, compared with the average analyst estimate of 63 cents, according to Thomson Reuters I/B/E/S.
Quarterly revenue rose 6 percent to $9.08 billion, while analysts targeted $9.04 billion. Yield, a measure of the average airfare paid per mile flown, rose 4 percent to 17.05 cents.
Operating expenses were up 2 percent, while costs for aircraft fuel and related taxes fell 7 percent.
In the fourth quarter, passenger revenue rose 9 percent in the United States, 18.5 percent in Latin America and 1.9 percent in Europe but fell 1.6 percent in the Pacific region.
Atlanta-based Delta acquired Northwest in 2008 and bolstered revenue by charging more for seats with greater leg room, replacing 50-seat jets with larger planes that carry more passengers and buying a refinery to reduce fuel costs.
It reduced debt and formed partnerships with non-U.S. airlines such as Britain's Virgin Atlantic Airways VA.UL and Brazil's Gol to expand in higher-growth markets.
The moves enabled Delta to pay its first dividend in a decade last year and start a $500 million share buyback program to boost shareholder returns. Delta rejoined the Standard & Poor's 500 Index last fall.
Reporting by Karen Jacobs in Atlanta; Editing by Jeffrey Benkoe and Chizu Nomiyama