Delta Air, AirTran Beat Analyst Estimates as Fuel Costs Decline

By Mary Jane Credeur

July 22 (Bloomberg) -- Delta Air Lines Inc., the world’s largest carrier, and AirTran Holdings Inc. posted second-quarter results that beat analyst expectations as fuel costs fell.

The net loss for Delta and Northwest Airlines combined was $257 million, or 31 cents a share, Atlanta-based Delta said today. The per-share loss excluding one-time items was 24 cents, better than the 29-cent average loss of 10 analyst estimates compiled by Bloomberg.

Delta paid 42 percent less for fuel than a year earlier and benefited from past capacity cuts and eliminating 8,000 jobs. Carriers have lowered fares to lure vacationers and keep planes full as businesses curb travel, leading Delta to say it’s reevaluating demand. United Airlines parent UAL Corp. said yesterday it will cut 7 percent more international capacity.

“We also need to take a hard look at our entire business, our network, fleet and cost structure, to determine other changes that must be made,” Chief Financial Officer Hank Halter said today in a memo to employees.

AirTran, the low-fare carrier that flies mostly in the eastern U.S., reported net income of $78.4 million, or 56 cents a share. Excluding one-time gains on fuel hedges, profit was 34 cents a share, beating the 32-cent average of 11 analyst estimates compiled by Bloomberg.

Delta rose 5 cents, or 1 percent, to $6.11 at 9:55 a.m. in New York Stock Exchange composite trading. The shares declined 47 percent this year through yesterday, while the Bloomberg U.S. Airlines Index of 13 carriers fell 43 percent.

AirTran, based in Orlando, Florida, gained 58 cents, or 10 percent, to $6.33, the biggest intraday gain since June 3.

Fare Sales

Delta’s deficit contributes to quarterly losses that may total $1.2 billion for the eight biggest carriers, according to Michael Linenberg, an analyst at Bank of America Corp. in New York. AMR Corp., UAL and Continental Airlines Inc. all reported operating losses starting last week, while Southwest Airlines Co. had a profit.

Revenue for Delta and Northwest combined fell 23 percent to $7 billion for the second quarter, better than the $6.93 billion analysts estimated, as lower fares prompted leisure travelers to take vacations.

Delta bought Northwest in October in an all-stock deal, surpassing AMR’s American Airlines as the world’s biggest carrier. Delta and Northwest had combined net income of $83 million in the year-earlier quarter because of one-time gains; the company didn’t provide a per-share figure on that basis.

The carrier reiterated its plans to trim total capacity by as much as 5 percent in the third quarter as capacity on its main jet operations declines as much as 7 percent.

Reduced Demand

Delta doesn’t expect to post a profit in 2009, Halter said. The airline was already projected to have a full-year loss of 80 cents a share, according to the average of 9 analyst estimates Bloomberg compiled.

Delta said last month it would reduce international flying by an additional 5 percent after the U.S. Labor Day holiday, for a 15 percent drop in overseas capacity. The carrier said at the time that the deeper cutbacks mean it must “reassess staffing needs.”

Earlier this month, 215 Delta pilots agreed to retire early as the carrier looks for ways to lower costs. Continental said yesterday it will eliminate 1,700 more jobs, and Southwest said 1,400 employees took voluntary buyouts.

AirTran’s net loss a year earlier was $14.8 million, or 14 cents a share. The carrier’s fuel bill slid 57 percent to $159.9 million as the price of oil collapsed.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

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