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Red ink swells at Delta

Old 04-21-2005, 03:44 PM
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Default Red ink swells at Delta

Red ink swells at Delta Air Lines
Quarterly loss tops $1 billion, reflecting fuel impact
By August Cole, MarketWatch
Last Update: 5:13 PM ET April 21, 2005

SAN FRANCISCO (MarketWatch) -- Delta Air Lines said Thursday that first-quarter losses reached more than $1 billion despite continued cost cutting and rising revenue as the carrier's fuel expenses shot skyward.

Gerald Grinstein, Delta's chief executive, called the results "disappointing."

Investors, however, bid higher shares of the Atlanta-based airline (DAL: news, chart, profile) , which rose 21 cents, or 5.8%, to $3.86.

"Record-breaking fuel prices are masking the many crucial, large-scale, core initiatives our airline implemented during the quarter," Grinstein said in a statement. "The issue is simple: including fuel, Delta is not on plan, but excluding fuel, we are better than plan."

Delta said that first-quarter losses totaled $1.07 billion, or $7.64 a share, wider than $383 million, or $3.12 a share, in the same period last year.

Analysts had expected a per-share loss of $4.76 a share, according to Thomson First Call.

Excluding $387 million in items from pension-related charges, retirement of jets and a tax-related gain, Delta's loss would have amounted to $4.89 a share.

The red ink came as no surprise. In March, Delta made clear that it was going to lose a lot of money and that it would have to find ways to trim expenses further.

Revenue in the latest quarter rose to $3.65 billion, a 3.3% increase over $3.53 billion last year.

Fuel costs increased 54% to $884 million, with the carrier paying an average price per gallon of $1.42 in the first quarter.

Cost per available seat mile was 12 cents. Excluding fuel and special items, the figure would have been 8.4 cents.

The carrier's losses have been mounting. Last year, the red ink neared $4 billion. The last time Delta had a profitable year was 2000.

Against this backdrop, Delta's stock has plunged, falling nearly 50% so far in 2005.

On April 12, the shares came under pressure after Fulcrum Global Partners downgraded the stock to neutral from buy and lowered its 12-month price target to $4 from $13.
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