Delta trims losses, AirTran posts profit

By Kelly Yamanouchi

The Atlanta Journal-Constitution

Delta Air Lines posted a $257 million second quarter loss on Wednesday and said it no longer forecasts a full-year profit amid the recession-induced travel slump. Meanwhile, rival AirTran Airways reported a $78.4 million profit.

Delta’s loss, which amounted to 31 cents per share, included $390 million in losses from fuel hedges and $58 million of costs for its merger with Northwest Airlines. Excluding those charges, Delta said it would have net profit of $191 million.

But the Atlanta-based airline said the travel outlook remains too cloudy to support earlier hopes of a profitable 2009.

“We are not planning for any meaningful recovery in the coming months and no longer expect to be profitable this year,” chief financial officer Hank Halter wrote in a memo to employees.

The second-quarter result compared to a year-ago net loss of $1 billion, when Delta recorded $1.2 billion in special charges for write-downs, severance and closing of some facilities at airports.

Delta and Northwest’s combined quarterly operating revenues declined 23 percent to $7 billion from $9 billion in the latest quarter. Delta said impact from the H1N1 virus on travel cut revenues by $125 million to $150 million.

In the first six months of the year, the recession led to a $3 billion decline in Delta’s revenues. Delta had $5.4 billion in unrestricted liquidity as of June 30, of which $4.9 billion was cash. It expects total liquidity to decline to $5 billion by the end of the current quarter in September.

Delta has cut headcount by 11 percent over the past year or so, chief executive Richard Anderson told analysts in a conference call. The company, which has more than 70,000 employees, cut about 6,500 through buyouts. Delta is also consolidating headquarters..

“While we can make no guarantees in the current environment, our goal continues to be to avoid involuntary furloughs of frontline employees,” Halter said in Wednesday’s memo.

Delta’s executive vice president of labor relations, Mike Campbell, said the company met with the National Mediation Board to express interest in resolving union representation among flight attendants and ground workers, who are unionized at Northwest but not at Delta.

AirTran’s profit for the second quarter amounted to 56 cents per diluted share. A year ago, AirTran, which has its largest hub in Atlanta, reported a loss of $14.8 million, or 14 cents per share.

AirTran’s profit included a $31 million gain related to fuel hedges, $3.3 million of gains from buying back debt and a $2.4 million write-off of interest from the sale of two Boeing 737 aircraft in the second quarter. AirTran plans to sell two more 737s this quarter and does not expect to grow its fleet until 2011.

Operating revenues at AirTran declined 12.9 percent to $603.7 million in the quarter.