By SHARA TIBKEN
July 16, 2008
Delta Air Lines Inc. swung to a second-quarter loss amid surging fuel costs and a weak U.S. economy.
What to expect from other major companies — including analyst forecasts for profit and revenue — as they report quarterly earnings
Delta, whose proposed acquisition of Northwest Airlines Corp. would topple AMR Corp.’s American Airlines from its perch as the world’s largest airline, reported a loss of $1.04 billion, or $2.64 a share, compared with year-ago net income of $1.59 billion. Year-ago results were boosted by $1.3 billion in bankruptcy emergence-related gains.
Excluding write-downs, Delta said earnings fell to $137 million, or 35 cents a share, from $274 million.
Revenue rose 10% to $5.5 billion.
The mean estimates of analysts polled by Thomson Reuters were for earnings of 10 cents a share, excluding some items, on revenue of $5.4 billion.
Delta hedged 49% of its fuel consumption and realized about $313 million in gains. Fuel costs averaged $3.13 a gallon, slightly above Delta’s April forecast.
The proposed Delta-Northwest combination – which would create the world’s largest passenger carrier – is expected to help the airlines cope better with high oil prices and falling demand without having to file for bankruptcy-court protection. Both companies emerged from bankruptcy in the past year after filing for Chapter 11 protection from creditors on the same day in September 2005.
The all-stock deal, originally valued at more than $3 billion but now worth about $1.6 billion due to the sharp drop in value of Delta’s stock, is expected to close by the end of the year. While some originally thought it would unleash a wave of consolidation, this has not been the case. Talks of mergers have fallen through in favor of less-binding, marketing partnerships such as that reached between UAL Corp.’s United Airlines and Continental Airlines Inc. in June.
Mainline revenue passenger miles, or one paying passenger flown one mile, rose 2.9%, as capacity increased 2.4%. In April, Delta forecasted capacity growth of 1% to 3%. The company didn’t give specific figures for Delta Airlines for load factor or revenue per available seat mile.
Looking ahead, Delta expects third-quarter mainline capacity flat, falling 11% to 13% domestically and jumping 17% to 19% internationally.
The company also projects fuel costs averaging $3.52 a gallon for the quarter and $3.32 for the year. The company said it has hedged about $3 billion of the estimated $4 billion raw impact of higher fuel costs in 2008.
Delta expects to end the year with a liquidity position of $3.2 billion. The company said it had $4.3 billion in unrestricted liquidity as of June 30. Delta said last month that its liquidity remained strong, despite a $4 billion increase in fuel costs for 2008.
Source: WALL STREET JOURNAL