(Reuters) - Delta Air Lines Inc reported better-than-expected profit for the fourth quarter on Thursday, helped by higher business fares and a busy holiday travel season, and forecast even better performance in the current quarter on strong demand for seats, sending its shares up 3.5 percent in premarket trading.
The No. 2 U.S. carrier is the first to report earnings after a broadly positive quarter, where most airlines managed to hike fares to offset growth in costs.
Atlanta-based Delta forecast total unit revenue, a measurement closely watched by investors, to increase by 2.5 percent to 4.5 percent in the first quarter of 2018.
"We enter 2018 with significant momentum and every entity delivering positive passenger unit revenue for the first time in five years, driven by a robust demand environment and improving business fares," said Delta's President Glen Hauenstein.
Based on that, Delta raised its full-year profit outlook to between $6.35 and $6.70 per share, well ahead of Wall Street estimates.
Delta's net income for the fourth quarter dipped to $572 million, or 80 cents per share, in the quarter ended Dec. 31, from $622 million, or 84 cents per share, a year earlier.
That included a one-time charge of $150 million due to changes in the U.S. tax code enacted in December. Delta said the new tax law would cut its tax rate to between 22 percent and 24 percent in 2018.
Total operating revenue rose 8.3 percent to $10.25 billion from $9.46 billion. Analysts on average had expected revenue of $10.13 billion.
"Stronger than expected revenues, good unit revenue momentum and raised 2018 guidance aided by benefits of tax reform would be the major takeaways," said CFRA Research analyst Jim Corridore on the increase in Delta shares.
Year over year, Delta's costs, excluding fuel and special items, increased 5.6 percent, driven by higher labor expenses and accelerated depreciation from aircraft retirements.