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VOL. 128 | NO. 15 | Wednesday, January 23, 2013

Delta Posts Hugely Profitable 2012


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Delta Air Lines Inc. on Tuesday, Jan. 22, reported a profitable quarter despite taking a substantial hit from Superstorm Sandy in October.

Delta announced net income of $238 million for the quarter ended in December 2012 and $1.6 billion for 2012, marking a year-over-year increase of $362 million, or 30 percent, over 2011.

The Atlanta-based airline, which operates one of its seven U.S. hubs in Memphis, ended last year with a strong holiday performance, posting five of the company’s top 10 revenue days on record and notching a new all-time high on Nov. 25, the Sunday after Thanksgiving.

“We entered 2013 as a stronger airline entering our fourth consecutive year of good profitability and free cash flow,” said Richard Anderson, Delta chief executive officer, during the company’s quarterly conference call and earnings report. “We will build on the success we enjoyed in 2012 by posting even better operating and financial results in 2013 as we execute on our commitment to sustainable and growing profitability for our investors.”

Last year the Atlanta-based air carrier completed significant operational and customer advancements that resulted in a 99.5 percent completion factor, an 86.5 percent on-time arrival rate, a 25 percent improvement in U.S. Department of Transportation luggage performance and a 40 percent reduction in DOT customer complaints.

Delta also launched an economy comfort class in 2012, enhanced its personal On-Demand entertainment systems, launched a new website and purchased a 49 percent stake in Virgin Atlantic.

Delta plans to recognize the hard work of its employees on Valentine’s Day with a $372 million profit sharing payout, which will equal 6.67 percent of base pay for front-line employees.

“We entered 2013 as a stronger airline entering our fourth consecutive year of good profitability and free cash flow.”

–Richard Anderson
CEO, Delta Air Lines Inc.

Delta’s net income for the December 2012 quarter was $238 million, or $0.28 per diluted share, excluding special items like a $122 million charge relating to its domestic fleet restructuring initiative.

It is replacing 50-seat planes used for regional flights with more efficient and customer-preferred 717’s, MD90’s 737-900’s and CRJ-900’s.

“Recent agreements with Sky West, Pinnacle and Bombardier have produced a clear path for us to eliminate more than 200 50-seaters, and we will begin taking delivery on the mainline aircraft and the CRJ-900’s in the September quarter,” said Paul Jacobson, Delta’s chief financial officer.

Regarding the agreement to bring Memphis-based Pinnacle Airlines Corp. out of bankruptcy, Delta has the right to retire Pinnacle’s entire fleet of 140 50-seat planes.

Delta expects strong results from the Pinnacle deal.

“When you look at what we’ve done with Pinnacle, it is going to be a revolutionary step because we actually for the first time have the right cost structure in place and the right fleet in place to be able to operate the most efficient 70- to 76-seat operator in the industry,” Anderson said. “We are pleased with the opportunity and believe it is going to drive a very significant advantage for Delta over the long run.”

Delta’s calculated net income for the quarter includes a $100 million negative impact of Superstorm Sandy on airline and refinery operations.

The company reduced net debt during 2012 by more than $1 billion and produced an 11 percent return on invested capital. Since 2010, the company has generated approximately $4 billion in free cash flow, 10 percent return on invested capital, and it has reduced net debt by roughly $5 billion.

Anderson expects revenues to increase 4 to 6 percent in the first quarter of this year.

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