News Column

Delta Reports Profit Despite Slowdown

April 23, 2013

Atlanta-based Delta Air Lines eked out a $7 million profit in the first quarter of the year, saying last-minute bookings declined in late March and leisure travel has slowed, while its revenue from travel in the defense sector is down amid federal budget cuts.

The across-the-board federal budget cuts known as sequestration, which led the Federal Aviation Administration to reduce air traffic controller staffing this week, are also leading to cancellations of flights on smaller regional planes.

Delta said it canceled about 90 of its regional Delta Connection flights in the Northeast on Monday to avoid long delays, and rebooked those passengers on larger airplanes. The airline said delays in the Northeast were in the 60 to 90 minute range, which Delta said it can manage.

"Ultimately the cost is borne in time by the consumer," said Delta chief executive Richard Anderson during a conference call Tuesday on the company's financial results.

Delta's profit was down from $124 million a year earlier. But the company said excluding unusual items like accounting adjustments for fuel contracts and aircraft and airport transactions, the fundamentals of its financial and operating performance were its strongest for a first quarter in more than a decade.

For years, airlines like Delta have lost money in the seasonably slower first quarter. Anderson called the profit "tangible proof that we are successfully changing the global airline business model at Delta."

The company grew its operating revenue by 1 percent to $8.5 billion, while operating expense climbed 3 percent to $8.3 billion.

Delta said it expects that as a result of the federal budget cuts, combined with softer demand for leisure travel, its unit revenues in April will decline by 2 to 3 percent. On the other hand, it is benefiting from lower fuel costs, allowing it to increase operating margin.

The company continues to struggle with achieving profitability on its recently-purchased oil refinery in Pennsylvania. The refinery lost $22 million in the first quarter due to supply disruptions and an outage on a gasoline production unit. Delta now expects to report a profit for the refinery for the second quarter, but the company now says it's unclear whether the refinery will turn a profit for the full year.

Looking at the second quarter, Delta said it expects its flying to be roughly flat, with international flying flat to down 1 percent and domestic flying to be up 1 to 2 percent. But the airline warned it may adjust its flight schedule in the fall based on market conditions.


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Source: (c)2013 The Atlanta Journal-Constitution (Atlanta, Ga.) Distributed by MCT Information Services


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