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Delta Posts Small Profit, Says It's Feeling Sequester Cuts

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Delta Air Lines said government spending cuts and weak demand from vacationers are hurting revenue this month.

Lower fuel prices should help to offset the decline, the airline said Tuesday.

Automatic government spending cuts that took effect last month have been cutting into air travel at some airlines. Delta said demand from last-minute travelers—a category that can include people flying on government business—began to fall in the last part of March, and that demand from leisure travelers is softer, too.

Delta said per-seat revenue will fall 2 percent to 3 percent this month.

In response, the airline has been keeping a lid on flying, aiming to charge more for the seats that it does offer to passengers. During the first quarter, it cut flying capacity by 3 percent. It said capacity will be flat to up 1 percent in the second quarter.

(Click here for Delta's latest stock price.)

The world's second-biggest airline earned $7 million, or a penny per share, for the quarter that ended March 31. Not counting special items, it would have earned $85 million, or 10 cents per share—better than analysts had been expecting. The company reported net income of $124 million in the year-ago quarter, but excluding special items it lost $39 million, or 5 cents per share.

Revenue rose 1 percent to $8.5 billion, matching analyst expectations.

The first three months of the year are often money-losers for airlines. Delta says this was its best first-quarter operating profit in more than a decade.

Yield, which is one way to measure fares, rose 2.1 percent.

Delta's oil refinery near Philadelphia lost $22 million because of ongoing supply disruptions from Hurricane Sandy and an outage in its gasoline production unit.

Earlier this year, Delta bought a 49-percent stake in Virgin Atlantic Airways. Overall, the company said that the first quarter was its best in a decade, as passengers largely shrugged at higher airline costs and weather delays.

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