http://www.bizjournals.com/cincinnati/stories/2009/03/09/daily30.html
Delta Air Lines Inc. told investors Tuesday it will post a profit for 2009 despite warnings of sizable loss in the first quarter on slumping revenues, upside-down fuel hedges and weakened passenger demand.
Delta President Ed Bastian said the Atlanta-based carrier’s operating revenues are expected to shrink 14 percent in the first quarter, while passenger revenues are expected drop 10 percent compared to the first quarter of 2008 because of slumping flight demand.
The carrier also said Tuesday it would further reduce its international capacity 10 percent , including an 11 percent to 13 percent cut to Trans-Atlantic capacity starting in September, while Trans-Pacific capacity will be down 12 percent to 14 percent compared with winter 2008.
The carrier has already implemented a 10 percent cut to domestic capacity and a 3 percent to 5 percent draw down in international capacity.
Delta (NYSE: DAL) pinned much of its turnaround efforts coming out of bankruptcy on traditionally lucrative international growth, but has had to pare its capacity as global travelers pull back.
Bastian said in the first quarter of the year – typically the weakest for most carriers – Delta also will face the heaviest losses related to “out-of-the-money” fuel hedges, which will carry over in some degree into the second quarter. Many carriers, like Delta, hedged their fuel purchases prior to the recent precipitous decline in prices.
Delta lost $8.9 billion in 2008, largely because of a one-time $7.3 billion non-cash charge, rewards tendered to its employee equity program and upside-down late-season fuel hedging.
Delta said earlier Tuesday in a memo to employees that in addition to the 2,100 employees who recently opted for early-out and retirement packages, the airline now has to “reassess our staffing needs” in the wake of the international route cuts. Delta did not mention specific job cut goals.
Bastian did not give guidance on potential losses for first quarter 2009 in his remarks to investors.
Still, despite slacking demand, dipping revenues and penalties from fuel hedging, Bastian said the carrier will be profitable in the second quarter and “we are expecting this year to be a profitable year.”
Bastian said the carrier boasts the best revenue performance and best cost structure of major United States-based airlines, and will see a substantial benefit from expiring fuel hedges and synergies from its merger with Northwest Airlines.
Delta will realize a $500 million savings related to the merger for 2009 and the carrier is moving as fast as possible to raise that figure to $2 billion annually once the carriers are totally combined, Bastian said.
As the economy has soured, airlines have struggled to maintain liquidity. Bastian said Delta should meet its guidance of $7 billion in liquidity by the end of the year.
Discussing the progress of Delta’s assumption of Northwest, Bastian, who is serving as Northwest’s CEO during the merger, said the combination of the two carriers is going “very, very smoothly.” The carrier hopes to receive its Single Operating Certificate from the Federal Aviation Administration by the end of the year.
Representation and seniority integration issues have been resolved for 25 percent of Delta’s more than 70,000 employees, including its pilots and mechanics. Ground workers and flight attendants from the carriers’ pre-merger work groups have not been integrated.
Twenty-four Northwest jets are now bearing Delta livery, with a total of 300 to be converted to Delta interiors and exteriors by year-end.
Executives are in the process of “rightsizing” the combined carrier’s supply of aircraft, moving wide-body jets to long haul points of origin and narrow-body planes to shorter routes.
Bastian said the combined carrier’s technology—including its reservation system—should be merged by January 2010.
The carriers have also integrated 107 Northwest stations to Delta colors, and airport-based employees will don Delta uniforms by the end of March.
“When you put that all together we will be a single airline by the spring of next year,” he said.
Delta Air Lines Inc. told investors Tuesday it will post a profit for 2009 despite warnings of sizable loss in the first quarter on slumping revenues, upside-down fuel hedges and weakened passenger demand.
Delta President Ed Bastian said the Atlanta-based carrier’s operating revenues are expected to shrink 14 percent in the first quarter, while passenger revenues are expected drop 10 percent compared to the first quarter of 2008 because of slumping flight demand.
The carrier also said Tuesday it would further reduce its international capacity 10 percent , including an 11 percent to 13 percent cut to Trans-Atlantic capacity starting in September, while Trans-Pacific capacity will be down 12 percent to 14 percent compared with winter 2008.
The carrier has already implemented a 10 percent cut to domestic capacity and a 3 percent to 5 percent draw down in international capacity.
Delta (NYSE: DAL) pinned much of its turnaround efforts coming out of bankruptcy on traditionally lucrative international growth, but has had to pare its capacity as global travelers pull back.
Bastian said in the first quarter of the year – typically the weakest for most carriers – Delta also will face the heaviest losses related to “out-of-the-money” fuel hedges, which will carry over in some degree into the second quarter. Many carriers, like Delta, hedged their fuel purchases prior to the recent precipitous decline in prices.
Delta lost $8.9 billion in 2008, largely because of a one-time $7.3 billion non-cash charge, rewards tendered to its employee equity program and upside-down late-season fuel hedging.
Delta said earlier Tuesday in a memo to employees that in addition to the 2,100 employees who recently opted for early-out and retirement packages, the airline now has to “reassess our staffing needs” in the wake of the international route cuts. Delta did not mention specific job cut goals.
Bastian did not give guidance on potential losses for first quarter 2009 in his remarks to investors.
Still, despite slacking demand, dipping revenues and penalties from fuel hedging, Bastian said the carrier will be profitable in the second quarter and “we are expecting this year to be a profitable year.”
Bastian said the carrier boasts the best revenue performance and best cost structure of major United States-based airlines, and will see a substantial benefit from expiring fuel hedges and synergies from its merger with Northwest Airlines.
Delta will realize a $500 million savings related to the merger for 2009 and the carrier is moving as fast as possible to raise that figure to $2 billion annually once the carriers are totally combined, Bastian said.
As the economy has soured, airlines have struggled to maintain liquidity. Bastian said Delta should meet its guidance of $7 billion in liquidity by the end of the year.
Discussing the progress of Delta’s assumption of Northwest, Bastian, who is serving as Northwest’s CEO during the merger, said the combination of the two carriers is going “very, very smoothly.” The carrier hopes to receive its Single Operating Certificate from the Federal Aviation Administration by the end of the year.
Representation and seniority integration issues have been resolved for 25 percent of Delta’s more than 70,000 employees, including its pilots and mechanics. Ground workers and flight attendants from the carriers’ pre-merger work groups have not been integrated.
Twenty-four Northwest jets are now bearing Delta livery, with a total of 300 to be converted to Delta interiors and exteriors by year-end.
Executives are in the process of “rightsizing” the combined carrier’s supply of aircraft, moving wide-body jets to long haul points of origin and narrow-body planes to shorter routes.
Bastian said the combined carrier’s technology—including its reservation system—should be merged by January 2010.
The carriers have also integrated 107 Northwest stations to Delta colors, and airport-based employees will don Delta uniforms by the end of March.
“When you put that all together we will be a single airline by the spring of next year,” he said.