U.S. Markets open in 6 hrs 9 mins

Delta Air cuts first-quarter operating margin forecast, citing higher costs

A Delta Air Lines Airbus A330 aircraft takes off at the Charles de Gaulle airport in Roissy, France, August 9, 2016. REUTERS/Jacky Naegelen

(Reuters) - Delta Air Lines Inc (DAL.N) on Monday cut its operating margin forecast for the current quarter, citing higher costs, and said it expected passenger unit revenue, a closely watched revenue metric, to be at the lower end of its forecast.

The No. 2 U.S. airline by passenger traffic Delta said its margins will likely contract this year as the pace of revenue improvement lags cost increases.

"Market fuel prices are tracking up about 55 percent for the quarter, which is expected to be the greatest year-on-year increase in 2017," the company said in an investor presentation.

Delta Air now expects operating margins to increase about 10-11 percent, less than 11-13 percent rise it had previously forecast.

The airline now expects passenger unit revenue, which compares sales to flight capacity, to be about flat in the first quarter ending March. (http://bit.ly/2msPAf6)

It had earlier expected passenger unit revenue to be between flat and up 2 percent.

The company's shares were down 1.3 percent at $49.50 in premarket trading.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila and Savio D'Souza)