Delta says it's already feeling the effects of rising oil prices


Delta Air Lines fell as much as 3.5% Wednesday after the carrier cut its second-quarter earnings forecast due to higher fuel costs. 

Presenting at Deutsche Bank's Global Industrials and Materials Summit on Wednesday, the airline said its fuel costs for the second quarter are up 50% year-over-year and 12% since the beginning of the quarter. Delta said it's now paying in the range of $2.20 to $2.25 per gallon of jet fuel, where it had paid $2.07 to $2.12 last quarter.

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13 best airlines in the world in 2018
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13 best airlines in the world in 2018

13. Wizz Air — 7.95. The budget Hungarian airline is reliable for being on time with an 88% on-time performance score, although a 6 on quality of service brought it down in the ranking.

12. Norwegian — 8. With a solid 8 for service and 8.61 for claim processing, the airline which boasts the world's longest low-cost route from London to Singapore came in at 12 for its well-rounded experience.

See what it's like to fly on Norwegian here.

11. KLM — 8.01. The Netherlands' Royal Dutch Airline has a good on-time performance of 85%, as well as a decent 7.54 for claim processing and 8 for service.

10. Virgin Atlantic — 8.04. The UK's Virgin Atlantic also scored well all around, with another 8 for service, 7.95 for claim processing, and 82% for punctuality.

9. Air Malta — 8.09. This lesser-known airline is incredibly efficient at processing claims with a score of 9.13 and pretty reliable for being on time at 86%, brought down only slightly by a service score of 7.

8. Qantas — 8.12. You can expect a punctual flight on Qantas — which now flies non-stop from Perth, Australia to London — with a rating of 89%, as well as an 8 for service.

See what the food is like on the nonstop Perth to London flight here.

7. Aegean Airlines — 8.19. This Greek airline is punctual with a score of 90%, as well as a surprisingly solid service score of 8.

6. Austrian Airlines — 8.25. Another impressive claim processing score comes from Austria's airline, which also scored an 8 for quality of service.

5. South African Airways — 8.31. The 8.69 claim processing score, 8 on service, and 85% on-time performance put South Africa's airline in fifth place.

See what it's like to fly business class on South African Airways here.

4. Singapore Airlines — 8.33. Set to launch the longest flight in the world at 19 hours from Singapore to New York, it's lucky Singapore's airline offers a full 10/10 for quality of service, as well as 85% on-time performance. Only its claim processing score — 6.77 — brought it down to fourth place this year.

See what it's like to fly first class on Singapore here.

3. Etihad Airways — 8.43. The UAE's Etihad is constantly named among the best airlines in the world, and with a score of 9 on service, 86% for punctuality, and 7.47 for claim processing, it's easy to see why.

Here's what it's like to take a $10,000 flight on Etihad Airways' First Class.

2. Lufthansa — 8.57. The German airline came in second place thanks to its score of 10 for service and 8.63 for claim processing, beat out only due to it 76% punctuality score.

See what it's like to take a £4,500 first class flight on Lufthansa here.

1. Qatar Airways — 9.07. The best airline in the world, according to the AirHelp Score, is Qatar Airways, which landed a perfect 10 for quality of service, an 8.86 claim processing score, and an 89% on-time performance score.

See what it's like to fly first class on the best airline in the world here.

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That rise in fuel costs mirrors a jump in oil prices in recent months from $60 a barrel at the start of 2018 to as high as $72 at the end of May.

Delta now expects a earnings per share (EPS) of between $1.65 and $1.75 for the quarter, while saying "revenue and demand remain strong across all entities in both leisure and business segments." It previously forecast earnings of $1.80 to $2 per share. 

As fuel costs rise for all airlines, investors are increasingly focused on where carriers can make capacity cuts to shore up margins. In May, Morgan Stanley said that fresh margin pressure — about 1-2 percentage points for every $10 of oil price increases — from expensive oil will force carriers to "instill pricing and capacity disciple."

"There has been a level of debate amongst investors around the implications of higher oil on Airline shares, and in our opinion, higher is a good thing," the bank's airline analyst Rajeev Lalwani told clients.

Other major airlines, including American and United, also fell slightly in trading Wednesday following Delta's announcement. Delta is down about 7% since the start of 2018.

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