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Last Updated: Monday, 15 March, 2004, 19:51 GMT
Delta warning hits airline shares
Delta Air Lines Boeing 767
Delta faces intense pressure to keep costs low
Shares in Delta Air Lines have fallen by 14%, after the US carrier forecast its quarterly loss would be bigger than previously expected.

According to Delta, high fuel prices are the main negative factor, and could push it into a $400m (222m) loss in the first quarter of the year.

The airline had earlier predicted a loss of $300m-350m.

The warning sent other airline shares spiralling lower, as fuel accounts for the majority of all carriers' costs.

At the same time, air fares are either falling or stagnant in the US market.

Burning up

Delta said that its fuel costs would rise by 3%.

And while that rise is not enormous, airlines are facing intense price competition, and few have sufficient mechanisms in place to hedge such increases.

The collapse in travel - especially once-lucrative business travel - since September 11, 2001, has started to moderate.

But at the same time, customers are demanding lower fares, and budget carriers account for a far larger slice of the business.

Some of Delta's closest competitors, including United Airlines, have bankruptcy protection, with gives them more flexibility to cut costs.

"All airlines are facing a competitive revenue environment," said Deutsche Bank analyst Susan Donofrio.

"And along with that, there's the rising fuel prices."


WATCH AND LISTEN
The BBC's Michelle Fleury
"Up goes Delta's fuel bill, down goes its share price"



SEE ALSO:
Southwest ahead of the pack
20 Oct 03  |  Business
EU-US in 'open skies' talks
01 Oct 03  |  Business
Troubled airlines scent recovery
24 Jul 03  |  Business


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