Delta Airlines Sees Brighter Skies Ahead

Delta Air Lines on Tuesday offered a more optimistic outlook for 2010 in spite of posting a greater-than-expected quarterly loss, saying it hoped an improving economy would spur demand according to the Financial Times.


Delta

The positive tone echoed better-than-expected results from US airlines last week. Southwest Airlines and Continental Airlines both said they saw better corporate travel trends and delivered improved quarterly profits.

Richard Anderson, Delta chief executive, said “2009 was one of the most difficult years [for the] airline industry and we are glad it is behind us. While we are disappointed to report a loss, we are encouraged that revenue and demand trends improved throughout the quarter.”

The company said that, with high-spending corporate travelers beginning to return to the skies and domestic and transatlantic travel picking up, it expected to see revenues per available seat – a key industry measure – increase in each month of 2010.

Delta also hopes to increase its $4bn ancillary revenues from baggage charges and its maintenance and repair organization by about $500m in 2010 as a result of price rises and higher demand.

“The revenue commentary is encouraging,” said Garry Chase at Barclays Capital. “The release points to a strong close to 2009 and continued improvement in pricing.” But Mr. Chase noted that much of the improvement in 2010 would be due to flattering comparisons with the recession-hit 2009 numbers.

The company made a net loss, excluding special items, of $225m, or 27 cents per share, in the fourth quarter to the end of December. This was slightly worse than analysts’ expectations of a loss of 24 cents per share, but a $285m improvement on the same period a year ago.

Revenues fell 12 per cent to $7.8bn in the quarter compared with the same period in 2008 as a result of the tough economic environment and sharp cuts in capacity designed to improve pricing power.

For the full year, Delta made a net loss of $1.2bn, down from a net loss of $8.9bn in 2008. Full-year revenues grew from $22.7bn to $28bn, boosted by the merger with Northwest Airlines, which was completed at the end of 2008 and catapulted Delta to the top of the industry, with a workforce of 75,000 people.

Delta said merger synergies would be crucial to improving the company’s performance in 2010. The company has secured $700m of benefits so far, with a further $600m targeted for 2010 as its single reservation and yield management system is rolled out.

Other priorities for 2010 include securing an alliance with Japan Airlines. Delta is trying to lure JAL away from its partnerships with American Airlines and the OneWorld alliance to its SkyTeam group.