General Lee
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By Elizabeth Souder
Of DOW JONES NEWSWIRES
NEW YORK -- Delta Air Lines Inc.'s (DAL) low-cost airline unit, Song, turned a profit in the first quarter, with operating costs 20% below that of similar operations at Delta's main airline.
"We had very strong financial results in the first quarter," said Song President John Selvaggio in an interview with Dow Jones Newswires. "April thus far is very strong, and May bookings are above last year."
Delta doesn't provide financial results for Song, which does about 10% of the airline's total flying. But a source at the airline confirmed that Song was in the black last quarter.
Song flies a fleet of 36 Boeing 757 airplanes on routes that primarily serve leisure passengers, mostly between the Northeast and Florida. Delta started the unit one year ago as a way to compete with low-cost carriers.
The unit's strong performance comes at a time when Delta executives are reviewing the company's entire operations to find ways to return to profitability. On Wednesday, Delta said losses for the whole company during the first quarter narrowed to $383 million from $426 million in the same period last year. Executives complained high pilot labor costs and reduced pricing power due to stiff low-cost competition kept the airline in the red.
Executives have said everything is on the table, and it isn't certain whether Song will survive the review as a distinct unit and brand. Song's profit would be an argument for keeping the unit intact.
At the same time, the first quarter is normally a good one for airlines that fly between the chilly Northeast and sunny Florida. Even though Song's load factors have been stronger than those of the main airline, President Selvaggio said the question of what to do with all those seats on the 757s during the off-season hasn't been solved. He is planning some special promotions for September, Song's toughest month.
"I'm confident that Song is going to fare well in that review," he said. "I'm very confident that Song will survive. I think we've established that a separate brand is accretive."
In a letter congratulating Song employees on their first anniversary of operations, Delta Chief Executive Jerry Grinstein on Thursday pointed out that Song has come up with some innovations that were adopted by the main airline. Delta has cut some costs by incorporating such Song ideas as boarding passengers according to zones rather than seats, selling food on board, and preparing planes more quickly for take-off.
"Song's leadership team has shared with me the positive first quarter results you have helped achieve, including operating costs that are approximately 20% below those for mainline 757's," Grinstein said in the letter.
Still, Delta has halted the growth it planned for Song, and Selvaggio doesn't expect the unit to expand again until after the review is completed in late summer.
Bye Bye--General Lee
Of DOW JONES NEWSWIRES
NEW YORK -- Delta Air Lines Inc.'s (DAL) low-cost airline unit, Song, turned a profit in the first quarter, with operating costs 20% below that of similar operations at Delta's main airline.
"We had very strong financial results in the first quarter," said Song President John Selvaggio in an interview with Dow Jones Newswires. "April thus far is very strong, and May bookings are above last year."
Delta doesn't provide financial results for Song, which does about 10% of the airline's total flying. But a source at the airline confirmed that Song was in the black last quarter.
Song flies a fleet of 36 Boeing 757 airplanes on routes that primarily serve leisure passengers, mostly between the Northeast and Florida. Delta started the unit one year ago as a way to compete with low-cost carriers.
The unit's strong performance comes at a time when Delta executives are reviewing the company's entire operations to find ways to return to profitability. On Wednesday, Delta said losses for the whole company during the first quarter narrowed to $383 million from $426 million in the same period last year. Executives complained high pilot labor costs and reduced pricing power due to stiff low-cost competition kept the airline in the red.
Executives have said everything is on the table, and it isn't certain whether Song will survive the review as a distinct unit and brand. Song's profit would be an argument for keeping the unit intact.
At the same time, the first quarter is normally a good one for airlines that fly between the chilly Northeast and sunny Florida. Even though Song's load factors have been stronger than those of the main airline, President Selvaggio said the question of what to do with all those seats on the 757s during the off-season hasn't been solved. He is planning some special promotions for September, Song's toughest month.
"I'm confident that Song is going to fare well in that review," he said. "I'm very confident that Song will survive. I think we've established that a separate brand is accretive."
In a letter congratulating Song employees on their first anniversary of operations, Delta Chief Executive Jerry Grinstein on Thursday pointed out that Song has come up with some innovations that were adopted by the main airline. Delta has cut some costs by incorporating such Song ideas as boarding passengers according to zones rather than seats, selling food on board, and preparing planes more quickly for take-off.
"Song's leadership team has shared with me the positive first quarter results you have helped achieve, including operating costs that are approximately 20% below those for mainline 757's," Grinstein said in the letter.
Still, Delta has halted the growth it planned for Song, and Selvaggio doesn't expect the unit to expand again until after the review is completed in late summer.
Bye Bye--General Lee
