Projected Delta numbers $$$$

[Howard Hughes]

Unit revenue improvements driving DL's surge to emergence, profitability

Wednesday March 28, 2007
In touting its restructuring at yesterday's Investor Day in Atlanta, Delta Air Lines said it expects to be profitable in its first year following emergence from bankruptcy protection, that it has succeeded in delivering on the "three pillars" of its transformation plan and that it remains interested in selling certain assets, including regional subsidiary Comair.
The carrier now expects to emerge from Chapter 11 on April 30, with a stock relisting scheduled for early the following month. It is projecting pre-tax earnings of $816 million in 2007 compared to a pre-tax loss of $452 million last year. Pre-tax profit will rise to $1.5-$1.6 billion in 2008-09 and $1.9 billion in 2010, DL said in its presentation, which it also filed with the US Securities and Exchange Commission.
For the current quarter it is forecasting consolidated passenger RASM of 10.52-10.56 cents, up 4% on the year-ago period. Mainline unit costs are projected to fall 7% to 9.95-9.99 cents, or 9% to 6.98-7.02 cents excluding fuel. Capacity will rise 1%-3%.
Unit revenue improvement was one of DL's pillars, dubbed "Closing the RASM Gap." In 2005 its length-of-haul adjusted passenger RASM of 8.64 cents was 86% of the industry average of 9.93 cents. Last year it rose to 93%, with DL's 10.18 cents comparing to the industry average of 11 cents. Last year's year-over-year improvement of 18% was the best among US majors, the company said, beating out US Airways' 14% and Southwest Airlines' 11%. Helping to drive improvement was a 13% plunge in domestic capacity, which far outpaced American Airlines' 3% and US's 1%. The aforementioned 4% PRASM improvement will compare to an industry average of 1.5%, DL said.
In addition to "Repairing the Balance Sheet," which it said was accomplished in part with a reduction in net debt to $7.6 billion from $17 billion, DL wanted to achieve "Best-in-Class Costs." Mainline unit cost excluding fuel has dropped from 8.99 cents in 2003 to an expected 6.60 cents in 2007.
Regarding Comair, CFO Ed Bastian said the company will "look at whether owning that business makes a lot of sense," according to press reports.

by Brian Straus

 

[Howard Hughes]

Delta may sell Comair
BY ALEXANDER COOLIDGE | [email protected]

Delta Air Lines is considering selling its Erlanger-based subsidiary Comair, a top Delta executive said Tuesday.

"We will, once we're out of bankruptcy, look at whether owning that business makes a lot of sense," Chief Financial Officer Ed Bastian said at an investor conference, adding in a later conference call that Delta's future options include "spinning off certain assets, such as Comair."

It's unclear what a sale of Comair would mean for the local economy or Delta's hub at Cincinnati/Northern Kentucky International Airport, where the regional feeder airline employs roughly 4,400.


Brian Nelson, an analyst with Morningstar in Chicago, reiterated a point made by Delta: that it doesn't have to own Comair to use its services.

"I don't think Delta is happy with Comair," he said. "It's a better than even chance they would get rid of them."

Delta officials have repeatedly hinted since both airlines went into bankruptcy in September 2005 that they might eventually jettison the local carrier, which Delta bought for $2.3 billion in 2000.

Experts say the timing is right for a sale but disagree on how it could occur.

Some analysts said it would be smart for Delta to cash out of Comair right after both emerge from bankruptcy on April 30 to take advantage of current optimism in the industry. Delta could use the money to expand, to pay down debt or to keep as reserves.

Comair spokeswoman Kate Marx declined to speculate other than to say the airline would "compete aggressively in any environment."

Richard Gritta, an economics professor and airline industry observer at University of Portland (Ore.), believes there is an 80 percent chance Delta will sell Comair, saying the timing was favorable and that Delta could use the cash.

"I think they're going to offload it," he said, adding Delta might have a buyer in mind.

"When you have a litter of kittens, you get rid of them as soon as possible," said Mike Boyd, an Evergreen, Colo., consultant, indicating Comair's appeal won't improve with time. He believes there is a better than 50-50 chance of a sale.

Analysts agreed that other regional carriers - including some that already do business with Delta - would be obvious suitors: Sky- West, Republic, Mesa, Air Wisconsin, Pinnacle.

Boyd thinks Delta will sell Comair to another regional carrier.

He said Delta could "unload" Comair for $200 million or more based on whether it offers the buyer attractive long-term contracts.

Boyd doubts Delta could get as much $500 million, since the outlook for regional airlines is bleak and Comair's fleet of mostly 50-seat jets makes it less appealing.

Stephen Brown, an analyst with Fitch Ratings in Chicago, wouldn't give odds or a price tag on a Comair sale but said it could happen depending on the future flying contract that would go with the airline.

He said private equity investors might be interested in Comair as well as other regional carriers.

Brown also added that after emerging from bankruptcy, the timing would be favorable for a sale - with Comair having settled long-festering labor disputes and with Delta able to keep the proceeds.

"There will be a higher price on a sale when times are better than if Delta falters again," he said.

Nelson believes there is a 60 percent chance Comair would be sold but he thinks a spinoff and initial public offering is more likely than a direct sale.

The Associated Press contributed

 

[jonjuan]

Last year's year-over-year improvement of 18% was the best among US majors, the company said, beating out US Airways' 14% and Southwest Airlines' 11%.
by Brian Straus

From completely sh1tty to pretty sh1tty is an improvement, I suppose.

 

[737 Pylt]

From completely sh1tty to pretty sh1tty is an improvement, I suppose.

jon:
I realize that was an attempt at being a smartass, but all in all, things considered, I think that is an excellent improvement. When DL exits bk, if we are still losing money hand over fist, then I'll agree with what you said.

737

 

[crjdxr]

Brown also added that after emerging from bankruptcy, the timing would be favorable for a sale - with Comair having settled long-festering labor disputes and with Delta able to keep the proceeds.

I don't think those disputes are quite "settled".