contrail67
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NEW YORK (Reuters) - Delta Air Lines Inc reported a wider-than-expected third-quarter loss on Wednesday as it faced more than $800 million in extra fuel bills due to the spike in oil prices during the quarter.
AMR Corp , parent of American Airlines, the world's largest carrier by traffic, is also expected to report a fuel-related loss later in the day.
Although the price of oil has returned to the same level as a year ago, around $76 per barrel, it jumped to a record-breaking $148 over the summer. That dashed airlines' hopes of a third-quarter profit, but results are expected to improve if oil stays at current levels.
The massive rise in oil last quarter forced airlines to raise fares and introduce new fees while they retire old planes, cut services, jobs and capacity and target more lucrative international routes. Those measures are expected to bring the industry back to profit in 2009.
"We broadly consider third-quarter industry results to be irrelevant, offering little to no insight as to the industry's 2009 profit potential," said JPMorgan analyst Jamie Baker, in a research note.
Delta said the recent fall in oil prices would save it money, but the outlook for next year was still cloudy.
"While near-term demand remains solid, the current economic crisis creates uncertainty about the longer-term revenue outlook," said Delta Chief Financial Officer Edward Bastian, in a statement. "At the same time, economic concerns have driven the price of fuel down steeply, which will provide significant savings to us."
Delta, which emerged from bankruptcy in April 2007, is set to overtake American as the world's largest airline when it completes its purchase of Northwest Airlines Corp . That deal is on track to close by the end of the year, Delta said on Wednesday.
Atlanta-based Delta, currently the U.S. No 3 carrier behind American and UAL Corp's United Airlines, reported a quarterly net loss of $50 million, or 13 cents per share, compared with a profit of $220 million, or 56 cents per share, in the same quarter last year.
Excluding one-time charges related to terminating contracts and the Northwest merger, it reported a loss of 7 cents per share. That was wider than the 2 cents per share loss expected by Wall Street, according to Reuters Estimates.
Delta increased operating revenue by 9 percent, to $5.7 billion, even though it reduced its flying capacity in the quarter, helped by strong transatlantic business, higher fares and more fees. But the airline's operating costs increased $814 million, or 17 percent, almost entirely due to higher fuel.
For the full year, Delta expects passenger unit revenue to rise 7 to 9 percent as it cuts flights and raises fares. It is expecting domestic capacity to fall 8 to 10 percent for the year, and capacity on its more lucrative international routes to rise 14 to 16 percent.
Delta shares fell 4.3 percent to $7.03 on the New York Stock Exchange. AMR shares fell 2.7 percent to $8.55.
AMR Corp , parent of American Airlines, the world's largest carrier by traffic, is also expected to report a fuel-related loss later in the day.
Although the price of oil has returned to the same level as a year ago, around $76 per barrel, it jumped to a record-breaking $148 over the summer. That dashed airlines' hopes of a third-quarter profit, but results are expected to improve if oil stays at current levels.
The massive rise in oil last quarter forced airlines to raise fares and introduce new fees while they retire old planes, cut services, jobs and capacity and target more lucrative international routes. Those measures are expected to bring the industry back to profit in 2009.
"We broadly consider third-quarter industry results to be irrelevant, offering little to no insight as to the industry's 2009 profit potential," said JPMorgan analyst Jamie Baker, in a research note.
Delta said the recent fall in oil prices would save it money, but the outlook for next year was still cloudy.
"While near-term demand remains solid, the current economic crisis creates uncertainty about the longer-term revenue outlook," said Delta Chief Financial Officer Edward Bastian, in a statement. "At the same time, economic concerns have driven the price of fuel down steeply, which will provide significant savings to us."
Delta, which emerged from bankruptcy in April 2007, is set to overtake American as the world's largest airline when it completes its purchase of Northwest Airlines Corp . That deal is on track to close by the end of the year, Delta said on Wednesday.
Atlanta-based Delta, currently the U.S. No 3 carrier behind American and UAL Corp's United Airlines, reported a quarterly net loss of $50 million, or 13 cents per share, compared with a profit of $220 million, or 56 cents per share, in the same quarter last year.
Excluding one-time charges related to terminating contracts and the Northwest merger, it reported a loss of 7 cents per share. That was wider than the 2 cents per share loss expected by Wall Street, according to Reuters Estimates.
Delta increased operating revenue by 9 percent, to $5.7 billion, even though it reduced its flying capacity in the quarter, helped by strong transatlantic business, higher fares and more fees. But the airline's operating costs increased $814 million, or 17 percent, almost entirely due to higher fuel.
For the full year, Delta expects passenger unit revenue to rise 7 to 9 percent as it cuts flights and raises fares. It is expecting domestic capacity to fall 8 to 10 percent for the year, and capacity on its more lucrative international routes to rise 14 to 16 percent.
Delta shares fell 4.3 percent to $7.03 on the New York Stock Exchange. AMR shares fell 2.7 percent to $8.55.