Delta Airlines announces steep losses

By

Posted 9:07AM on Friday, July 19, 2002

Three of the nation's largest airlines Thursday blamed huge second quarter losses on the air travel slump and the need to lure passengers with cheaper fares. But Southwest Airlines, the leading low-cost carrier, remained profitable even as its margins were squeezed under these harsh business conditions. The combined $527 million in losses announced by Delta, Northwest and US Airways comes on the heels of steep losses by their rivals. American and Continental reported losses of $495 million and $139 million, respectively, earlier this week. The nine largest carriers are expected to report a combined quarterly loss of $1.3 billion and with the outlook for the next six months also grim, analysts are predicting losses for the year to reach $5.5 billion. Major carriers lost $2.4 billion during the first three months of 2002. During the second quarter, industrywide passenger traffic fell 10 percent, according to UBS Warburg analyst Samuel Buttrick. Because average ticket prices were down sharply, revenue per passenger dropped 17 percent, Buttrick said. Delta Air Lines The nation's third largest airline said second quarter losses more than doubled to $186 million, or $1.54 per share, compared with $90 million, or 76 cents a share, in the same period a year ago. Delta's results beat analysts low expectations. Revenue declined 8 percent, to $3.47 billion, from $3.77 billion in the same quarter last year. Excluding $24 million one-time costs related to grounded aircraft and other expenses, Delta lost $162 million, or $1.34 per share. Analysts had expected a loss of $1.39 per share, according to a survey by Thomson Financial/First Call. In a sign of an improving operating environment, Delta said it was profitable during the month of June and had positive cash-flow during the entire April-June period -- the first such quarter since the Sept. 11 terrorist attacks. "Delta's financial performance is recovering slowly as we work through one of the most challenging times in the history of our company and our industry," said Leo F. Mullin, Delta's chairman and chief executive. Mullin said he expected a "turning point" for the company by the end of June, but "that simply has not occurred." Further service reductions will be necessary, the company said. Like its major rivals, Delta's recovery from the decline in air travel after Sept. 11 has been hampered by reduced spending by business travelers and an inability to make price increases stick for leisure travelers. Atlanta-based Delta has lost $583 million, or $4.79 per share, through the first half of the year, compared to a loss of $223 million, or $1.87 a share, in the first six months of 2001. Half-year revenue was $6.57 billion, down from $7.61 billion in the first half of last year. Delta ended the quarter with $2.8 billion in cash and other reserves. Shares of Delta rose 10 cents to $16.55 Thursday on the New York Stock Exchange.