WASHINGTON (MarketWatch) — Delta Air Lines said Wednesday it expects “solid” profit growth next year on the back of strong business-travel demand and cost cutting.

For 2012, the Atlanta-based carrier said it would trim between 2% and 3% from its system-wide seat capacity to help boost its ticket prices. For trans-Atlantic flights, which include some of the industry’s highest-yielding routes, Delta and its joint venture partners want to pull their combined capacity down by 7% to 8% in anticipation of a European recession.


Travelers pass by the Delta check-in area as the Thanksgiving holiday begins last month at Hartsfield-Jackson Atlanta International Airport in Atlanta, Georgia.
Globally, however, Delta expects the economy to grow slowly, spurring more deep-pocketed business people to travel. Corporate travel is expected to rise 6% to 8% next year from 2011 levels, the airline said in a government filing.

In the last four weeks, health care, financial services and transportation sector related travel are up sharply from the same period in 2010, Delta said.

Earnings in 2011 are projected to be $800 million, or $1.1 billion after adjusting for restructuring and loss on extinguishment of debt, Delta said. Analysts surveyed by FactSet Research were looking for full-year adjusted earnings of $977 million, on average.

Delta posted an adjusted profit of $1.44 billion last year.

Shares of Delta /quotes/zigman/463579/quotes/nls/dal DAL +1.63% have had a rough year with fuel prices up sharply and concerns a sovereign-debt crisis in Europe could drag down the global economy and reduce the demand for flying. In the past year the carrier’s stock is off by nearly 38%, and it’s down about 3% in the last three months.

On Wednesday, Delta shares rose more than 2% to an intraday high of $8.35. More recently the stock was up 1.6% to $8.12. The benchmark Standard & Poor’s 500 Index /quotes/zigman/3870025 SPX -1.17% slipped less than 1% to about 1,217 points.

To offset a roughly 40% jump in its fuel bill, Delta said it intends to lower its non-fuel costs to 2010 levels, but a climbing labor expense and higher airport fees have frustrated the attempt.

Non-fuel costs per available seat mile next year is expected to rise by 2% to 4%, or about 40 cents higher than the targeted level.

Delta will focus on structural changes to help bring costs down, including the delivery on new, more fuel efficient Boeing Co. /quotes/zigman/220026/quotes/nls/ba BA -1.45% 737-900ER jets at the end of 2012 that will lower maintenance costs. There are also opportunities to increase employee productivity and eliminate more smaller-gauge aircraft, especially 50-seat regional jets.
Combined, these structural changes could lower the airline’s costs by $600 million to $750 million.

The airline is also focused on reducing its debt, and projects its adjusted net debt at the end of 2011 will be $12.9 billion, down from $17 billion at the end of 2009.

By the end of 2013, Delta wants to get its debt down to about $10 billion.

Delta Air Lines competes directly with United Continental Holdings /quotes/zigman/617037/quotes/nls/ual UAL +1.74% , US Airways /quotes/zigman/390962/quotes/nls/lcc LCC +7.80% and bankrupt AMR Corp. /quotes/zigman/217884/quotes/nls/amr AMR +10.72% , the parent company for American Airlines.

European partners in Delta’s SkyTeam alliance include Aeroflot /quotes/zigman/4143028 RU:AFLT -0.11% , Air Europa, Air France-KLM /quotes/zigman/127885 FR:AF -3.34% /quotes/zigman/346235 AFLYY -1.57% , Alitalia, Tarom, and Czech Airlines.
/quotes/zigman/463579/quotes/nls/dal Add DAL to portfolio DAL Delta Air Lines Inc. $ 8.12 +0.13 +1.63% Volume: 11.60mDec. 14, 2011 2:56p
/quotes/zigman/3870025 Add SPX to portfolio SPX S&P 500 Index 1,211.36 -14.37 -1.17% Volume: 419.48mDec. 14, 2011 2:56p
/quotes/zigman/220026/quotes/nls/ba Add BA to portfolio BA Boeing Co. $ 69.87 -1.03 -1.45% Volume: 4.20mDec. 14, 2011 2:56p
/quotes/zigman/617037/quotes/nls/ual Add UAL to portfolio UAL United Continental Holdings Inc. $ 19.90 +0.34 +1.74% Volume: 3.23mDec. 14, 2011 2:56p
/quotes/zigman/390962/quotes/nls/lcc Add LCC to portfolio LCC US Airways Group Inc. $ 5.60 +0.41 +7.80% Volume: 6.38mDec. 14, 2011 2:56p
/quotes/zigman/217884/quotes/nls/amr Add AMR to portfolio AMR AMR Corp. $ 0.68 +0.07 +10.72% Volume: 35.75mDec. 14, 2011 2:56p
/quotes/zigman/4143028 Add AFLT to portfolio RU:AFLT Aeroflot-Russian Airlines р. 45.85 -0.05 -0.11% Volume: 1.03MDec. 13, 2011 12:00a
/quotes/zigman/127885 Add AF to portfolio FR:AF Air France-KLM € 3.85 -0.13 -3.34% Volume: 3.41mDec. 14, 2011 5:35p
/quotes/zigman/346235 Add AFLYY to portfolio AFLYY Air France-KLM ADS $ 5.02 -0.08 -1.57% Volume: 3,008Dec. 14, 2011 2:29p
Christopher Hinton is a reporter for MarketWatch based in Washington.

 

I follow your posts, and this one is spot on as usual. +1 !!

 

Mesa Management is currently negotiating a 5% pay cut for its pilots. I think I would rather see an airline close its doors before pay and QOL gets any worse; at least at the regional level.

 

I don't see it happening either. United and American pilots were trying to save their pensions and save a job they hoped they would have for life. We don't have pensions and most of us have no intention of working at 9E for life. There is no reason for most of us to even consider a concession.

 

spot on ! i agree 100%

 

Just say no. Does anyone at Mesa really think a 5% pay cut will save te company?

 

This whole situation just seems fake to me. I've been following the stock, reading the business related articles, and reading this thread for quite some time now.

For an airline the size of Pinnacle to loose a few million dollars during a transition period is more or less a "Break-Even." When FedEx bought Kinko's, which costs millions and millions of dollars, that transition period showed FedEx to have a loss. Nobody panicked as it was clearly explained by Fred Smith. Excluding the one time fees of this transaction, FedEx was profitable. No big deal.

Same with Pinnacle, excluding the one time fees of streamling 3 airlines into one, and a move to downtown Memphis...the airline isn't in financial trouble. When it's all said and done, Pinnacle will be back to normal, and with greater synergies than before.

What is troubling to me, is the CEO is literally scaring the $hit out of everyone. What CEO does this? One that purposely wants to send the stock price in the toilet? (He did a good job with that!) One that wants to deliberately send the business in bankruptcy perhaps? Hmmmm.

For the past few years we've seen high oil price bring up the CASM exponentially for the 50 seat market. Some routes are profitable, while the majority are not. It's no secret at all that the Legacy carriers as a whole, want to shrink down the utilization of their 50 seat jets.

If I was a pilot at Pinnacle right now, I would be holding the CEO accountable for why on earth he hasn't exercised the option, yet, to have the pilot cost income from Delta be set to the actual cost (as clearly outlined in the ASA). If this option isn't exercised, then of course the airline will be less profitable, or in this case, a loss.

Sean Menke knows deep down inside that the pilot group will NOT take a paycut, not 1 red penny.....especially after negotiating for 5 loooong years. If the flight attendants give up 10 %, what is that? A buck and a half per hour? The rest of the employees dont' make up any cost savings as most are barely above minimum wage. The leadership restructing leaves the airline with paying out massive golden parachute packages in the millions.


This whole thing is a fraud, I smell a rat. There's more to this story, my guess is Delta is directing this to save face, by creatively, yet legally, shrink down the utilization of the 50 seaters, simply because they aren't profitable.


Meanwhile........Phil Trenary and Doug Shockey are living it up at a 5 star resort in the tropics, blowing their millions........

 

Yup...10-Qs show they were operationally profitable each of the last three quarters; operating expenses (which include employee wages) were lower than operating revenues. However, non-operational interest expense threw them to a loss each quarter.

I think this has much less to do with employees than it does vendors, lenders and lease holders...float a non-too-subtle threat of bankruptcy as leverage to renegotiate more favorable terms.

 

The big question is, are the employees going to realize that, in all reality, Pinnacle isn't in any financial danger?

So they bump along breaking even for a while, big deal.....

 

The entire pilot group needs to read your first post. Most importantly I hope the MEC sees the same thing you do. The only reason I can think of pushing us into bankruptcy is the fact that Delta wants to be rid of 50 seaters. If Pinnacle delcares than its an open avenue for parking more 50's. I really wouldn't put it passed Delta to have a larger hand in this whole deal. Companies never make money in a transition.

The more and more I think about the packages those SVP's are getting when they get the boot makes me sick to my stomach, but then again its the world we've always lived in. We pilots are on the wrong side of the house.