Delta Posts Loss, but Sees Profitable 2009

Delta Air Lines, the world's largest air carrier, reported a quarterly loss on merger costs and bad fuel hedges Tuesday, but said falling fuel prices and downsizing would bring profits in 2009.

The airline linked the bulk of its $1.4 billion fourth-quarter loss to a noncash charged related to its purchase of Northwest Airlines late last year.

AP

Like rivals AMR and UAL , which reported losses last week, Delta complained of economic weakness that is eroding travel demand and forcing airlines to cut the number of seats for sale.

But Chief Executive Richard Anderson was optimistic.

"Despite the difficult economic environment, we expect to be solidly profitable in 2009, driven by lower fuel costs, capacity discipline, and merger synergies," he said in a statement.

The airline industry was battered in 2008 by high fuel prices and later by economic weakness. Downsizing helped carriers bolster fares while travel budgets and demand shrank.

Delta had an advantage over its peers, however, as its merger with Northwest allowed it to make its operations more efficient.

Delta, which slashed its domestic capacity by 11 percent in the second half of 2008, said it would cut total mainline capacity by another 6 percent to 8 percent in 2009. The reduction will require the removal of 40 to 50 mainline aircraft from its fleet.

"They're definitely taking capacity down probably more than what people thought they would be doing," said Helane Becker, airline analyst at Jesup & Lamont Securities.

Airlines are braced for a particularly tough first quarter, she said, but the outlook improves later in the year.

"We think the second half of the year will be better," she said. "And I think that's the case for Delta."

Results

Delta said its fourth-quarter net loss had widened to $1.4 billion, or $2.11 per share, from $70 million, or 18 cents per share, a year earlier, before the merger.

The results, however, feature one-time items, including a charge of more than $900 million related to broad-based employee equity awards, and a $91 million loss on out-of-period fuel hedges. Top carriers have reported losses on these hedges as the price of jet fuel plummeted in the second half of 2008.

Excluding one-time items, the company said it had lost $340 million, or 50 cents per share. Although, fuel prices have fallen since July, Delta said its fourth-quarter fuel bill was 69 percent higher than it was a year earlier.

The company reported operating revenue of $6.7 billion, a 43 percent gain over the comparable period. Delta ended the quarter with $6.1 billion in liquidity.

Delta shares fell 4.3 percent to $9.50 in trading before the market opened.

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