ATW Daily News

Delta posts $257 million loss, promises 'top-to-bottom' review

Thursday July 23, 2009

Delta Air Lines posted a second-quarter net loss of $257 million, narrowed from a $1.04 billion deficit in the year-ago period, with results for both quarters heavily affected by special charges.

For the current period, $58 million in expenses related to DL's acquisition of Northwest Airlines and fuel hedge losses of $390 million pushed it into red. Absent these charges, it would have reported a net profit of $191 million. In the year-ago period, it would have earned $137 million excluding $1.3 billion in special charges largely related to goodwill impairment.

Notwithstanding the year-over-year improvement, executives expressed concern over "unprecedented" revenue declines that are requiring a "top-to-bottom" review of the airline's "whole business" that may lead to "some difficult decisions." CEO Richard Anderson was not specific on possible cuts or changes, though he noted that the merger gives the company "flexibility" to ground aircraft. He said DL did not see "any meaningful [economic] recovery in 2009."

The carrier already has announced capacity reductions that will see its ASMs 10% lower for the full year compared to 2008 including a 15% year-over-year international cut for the last four months of 2009 (ATWOnline, June 12). The combined DL/NWA workforce has been reduced by 11%.

Second-quarter operating revenue decreased 27% to $7 billion, though year-to-year comparisons are difficult because 2008 results did not include NWA. Executives said in a conference call with analysts and reporters that combined revenue was down 23%. Expenses rose 6% (excluding NWA results for 2008) to $6.99 billion and operating profit was $1 million, reversed from an operating loss of $1.09 billion last year.

Combined DL/NWA consolidated traffic lowered 7.9% to 49.05 billion RPMs on a 6.9% decline in capacity to 59.03 billion ASMs, producing a load factor of 83.1%, down 0.9 point. Yield dipped 19% to 12.04 cents as PRASM sank 19.9% to 10 cents and CASM fell 27.8% to 11.55 cents. CASM excluding special items lowered 14.7% to 11.45 cents and CASM excluding fuel and special items rose 2.2% to 8.06 cents.

by Aaron Karp

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