For the most part, shares of Delta Air Lines (DAL 46.49, -1.03, -2.2%) have been grounded since the company's second quarter earnings report in mid July, falling as much as 17% in the interim before bouncing a bit in recent weeks. The stock is experiencing some turbulence today, however, after the airline cut its third quarter unit revenue and operating margin guidance.
Due to domestic close-in yields being slower than anticipated, Delta now expects passenger unit revenue growth in the third quarter to be 2% to 3% versus its prior guidance of 2.5% to 4.5%.
That softness combined with higher fuel costs, which picked up in late July, leads Delta to believe its operating margin will now be between 16.5% and 17.5% versus its prior guidance of 18% to 20%.
Delta seems to have done a good job managing other expenses, though, as it maintained its guidance for cost per available seat mile to be up approximately 2%.
Concerns about increased fare competition have been hanging over the entire industry, and Delta's warning will add to those worries, which have driven the NYSE Arca Airline Index (XAL 106.52) 12% lower since mid July.
Related competitors trading lower this morning after Delta's warning are American Airlines (AAL 44.39, -0.93, -2.0%), Southwest Airlines (LUV 51.36, -0.83, -1.6%), United Continental (UAL 61.3, -0.70, -1.1%), and Spirit Airlines (SAVE 33.35, -0.68, -2.0%).
The weakness in the airlines is pressuring the Dow Jones Transportation Average, which has slipped 0.6% after gaining 2.4% last week.