Delta, US Airways Pull Major Airline Losses to $951 Million
April 26, 2011, 4:36 PM EDTBy Mary Schlangenstein and Mary Jane Credeur
(Updates with analyst comment in third paragraph.)
April 26 (Bloomberg) -- Delta Air Lines Inc. and US Airways Group Inc. posted losses that brought the first-quarter deficit for the five biggest U.S. carriers to $951 million as jet fuel prices surged.
The loss for the group was less than analysts estimated, helping send the Bloomberg U.S. Airlines Index to the biggest gain since March 8. Delta and US Airways both said they would cut 2011 growth plans for a second time, joining American Airlines parent AMR Corp.’s move last week.
“The quarter was in line to slightly better” than expected, said Hunter Keay, an analyst at Wolfe Trahan & Co. in New York. “There were a couple of marginal capacity reductions. It’s baby steps in the right direction, and there was good commentary about demand.”
Delta, United Continental Holdings Inc., AMR and US Airways all reported losses smaller than analysts expected, while Southwest Airlines Co. met the average estimate. Southwest, the largest low-fare carrier, was alone in reporting a profit.
The adjusted loss at Delta, the world’s second-biggest airline, narrowed to $320 million, or 38 cents a share, less than the 50-cent average loss estimate of 13 analysts surveyed by Bloomberg. US Airways’ adjusted loss widened to $110 million, or 68 cents, excluding some items. The result was narrower than the 72-cent average from 13 analysts.
Delta rose 99 cents, or 11 percent, to $9.99 at 4 p.m. in New York Stock Exchange composite trading, for the biggest one- day advance since Dec. 11, 2009. US Airways climbed 52 cents, or 6.2 percent, to $8.80. The Bloomberg index of 12 airlines increased 4.1 percent.
Fares, Fuel
Six systemwide fare increases taken by the carriers during the quarter couldn’t overcome a 41 percent increase from a year earlier in the price of jet fuel for immediate delivery in New York harbor.
The combined loss for the five, excluding special items, widened from $892 million a year earlier. On a net basis, the deficit for the group widened to $1.08 billion from $978 million a year earlier.
“Fuel is the biggest challenge facing this industry,” Delta Chief Executive Officer Richard Anderson said today in a statement.
Delta
Delta said it would retire 10 more planes over the next 18 months, including about 60 of its 50-seat regional jets and some Saab AB turboprops. The Atlanta-based airline also will park 20 planes in its main jet fleet, including some wide-body jets used on international routes, Anderson said on a conference call.
“Seventy percent cost recapture isn’t enough,” he said. “We must fully recoup the costs on every flight, every day.”
First-quarter revenue rose 13 percent to $7.75 billion.
Delta also trimmed its capital spending budget for the year by $300 million to $1.2 billion, and it plans to reduce capacity by 4 percentage points in the second half of the year by cutting flights in markets where fares aren’t covering fuel costs. The hub in Memphis, Tennessee, will have departures cut by a quarter, Delta said.
Cancellations during severe winter weather reduced revenue by $90 million, while the plunge in demand for travel to Japan lowered revenue by $35 million.
US Airways
US Airways today further trimmed growth plans, saying capacity for the full year will increase 1 percent over 2010, down from original plans for 2 percent. The airline initially pared growth in March. The carrier also cut non-aircraft capital spending, by $20 million to $160 million.
US Airways is the only carrier among the five largest in the U.S. that doesn’t use hedging contracts to help adjust for changes in fuel prices. The Tempe, Arizona-based airline’s spending for fuel rose 37 percent to $734 million, topping expenses.
“Our first-quarter results were clearly impacted by the extremely high price of oil,” CEO Doug Parker said in the statement.
Including unspecified costs linked to a US Airways regional carrier and other items, the net loss widened to $114 million, or 71 cents a share, from $45 million, or 28 cents. Sales rose 12 percent to $2.96 billion.
Business travel demand remains strong, even with a March and April drop in total booked revenue, as do airfares, President Scott Kirby said on a conference call. The airline forecasts April revenue from each seat flown a mile will increase about 6 percent from a year earlier, with gains of at least 10 percent returning in May and June, he said.
--Editors: Niamh Ring, Stephen West
To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net
