Delta Confident Despite Q1 Loss

By Bill Dries

Delta Air Lines Inc. posted a net loss of $39 million in the first quarter of 2012 including taxes, but thanks to fuel hedging gains the Atlanta-based airline posted its best March quarter since 2000.

“Our pre-tax results were an improvement from the prior year,” said Delta President Ed Bastian, who attributed the $36 million pre-tax loss to Delta’s philosophy of cutting capacity, including cuts in regional flights at Memphis International Airport. “So, clearly our plan is working.”

Delta’s net income was $124 million, or 15 cents per share. Revenue rose 9 percent to $8.41 billion.

The first quarter is the three-month period in which the company pays its taxes.

Atlanta-based Delta’s income tax expense increased $75 million from a year ago, mostly reflecting the $71 million benefit Delta had in the previous year from tax credits.

Delta’s passenger revenue for the March quarter increased by $651 million, a 10 percent increase from a year ago.

Bastian said monthly revenue figures for June compared to a year earlier are likely to be “tough” because of fare increases then that increased revenue for the month.

Delta’s fuel expense rose $250 million or 14 percent compared to a year ago during the March quarter.

The combination of a fuel expense offset to the tune of $45 million by reduced consumption from Delta’s reduced capacity as well as its fuel hedging program prompted Delta CEO Richard Anderson to tout the company’s plan of reducing capacity and passing on higher fuel costs to consumers.

Delta’s capacity for the first three months of this year was down 3 percent from the year before.

“Our revenue performance outpaced the industry and we saw margin improvement in every region and in every hub across our global network,” Anderson told analysts in a Wednesday, April 25, earnings call. “This plan is the same strategy we have discussed with our investors for the last three years. So, please expect the same. … We like the trajectory we are on, so we will stay the course.”

Staying the course is having negative effects on passenger traffic at Memphis International, where Delta operates one of its seven U.S. hubs.

Memphis International Airport numbers from last month and March 2011 tell the story of the impact of the Memphis capacity cuts that began last August.

Delta Airlines had 44 daily mainline scheduled flights a year earlier compared to 34 last month, not counting regional flights under the Delta brand. The 295,959 passengers a year ago compares to 236,154 for this march.

The passenger count for all flights at Memphis International last month was a 22 percent drop from the same count a year ago. The scheduled flights were down 23 percent from the year before.