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Delta Posts $397 Million 1Q Loss

April 16, 2002

ATLANTA (AP) _ Delta Air Lines posted a loss of $397 million in the first quarter, as passenger revenues continued to lag, but the carrier said it sees signs of a gradual recovery _ including a small operating profit last month.

The company expects ``a second quarter loss significantly lower than the first quarter loss, but a loss nonetheless,″ chief financial officer M. Michele Burns told analysts Tuesday in a conference call.

The loss was equal to $3.25 per share for the January-March period. Delta lost $133 million, or $1.11 per share, in the same period of 2001.

Excluding one-time items, Delta lost $354 million, or $2.90 per share, in the latest quarter. That was 3 cents a share more than the consensus forecast of analysts surveyed by Thomson Financial/First Call.

Revenue was down 19 percent to $3.10 billion from $3.84 billion in the same quarter of 2001.

In a telephone interview, Burns said Delta’s recovery has been slowed by depressed ticket prices, especially business fares. ``We expect that the entire year will be a process of recovering on the revenue line,″ she said.

The company did not disclose specific numbers for the operating profit for last month.

On Monday, Continental Airlines reported a pretax profit of $25 million in March, but posted a loss of $166 million in the first quarter. Continental said that was its first monthly profit since the Sept. 11 terror attacks.

Delta’s regional carriers, Atlantic Southeast Airlines and Comair, were profitable in the first quarter, Burns said.

Financial recovery has been helped by a nearly 11 percent drop in capacity, compared to the first quarter of 2001. Delta officials said they plan a rigorous review of traffic and yields before adding new flights this year.

Such ``capacity discipline″ will be key to restoring the industry’s collective balance sheet, said Garry Chase, an airline analyst with Lehman Brothers. He predicts carriers’ will permanently fly 5 percent fewer seats than they did before the Sept. 11 attacks, hoping to boost earnings.

``The industry needs pricing recovery in order to return to financial health,″ Chase said. ``And pricing power cannot come without a permanent reduction in capacity.″

Delta’s results included $43 million in one-time charges, including $25 million in costs for grounded airplanes and surplus pilots and $18 million after taxes for accounting changes related to its holdings in Priceline.com.

During the quarter, Delta also led an industry move to end base commissions to travel agents. The company said it expects to save $100 million to $150 million in agent commissions this year. Delta will continue to pay incentives to certain agencies that deliver high-volume sales.

Atlanta-based Delta is the nation’s third-largest carrier, with hubs in Atlanta, Cincinnati, Dallas-Fort Worth and Salt Lake City.

Delta shares fell 18 cents to $29.83 in afternoon trading Tuesday on the New York Stock Exchange.


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