Delta posts $549 million quarterly profit

Fare increases and stronger corporate travel combined with cost cuts brought Delta Air Lines a $549 million profit for the third quarter, but the airline continues to pare back its flight schedule to adjust to fuel costs and a tepid economic recovery.

"We anticipate that the current environment of high fuel prices and an uncertain economy will continue into 2012," Delta chief financial officer Hank Halter told employees in an internal memo.

The quarterly profit for Atlanta-based Delta amounted to 65 cents per diluted share. A year earlier, Delta reported $363 million in net income, equivalent to 43 cents a share.

But the huge increase in fuel costs did take its toll. Excluding $216 million in special items -- mostly to mark down the value of future fuel hedges -- Delta reported a $765 million profit, or 91 cents per diluted share. That's down from a year-ago profit of $929 million, excluding special items.

For this year's third quarter, Delta reported a 10 percent increase in operating revenue to $9.8 billion for the quarter ended Sept. 30. Its operating expense increased 13 percent to nearly $9 billion. The results include $167 million in expense for profit sharing.

In the quarter, Delta cut flight capacity by 1 percent but planes were slightly fuller, leaving passenger traffic roughly flat. About 2,000 employees took buyouts offered by the airline earlier this year and Delta in September laid off about 200 administrative employees.

The company ended the third quarter with $5.1 billion in unrestricted liquidity, including $3.3 billion in cash and $1.8 billion in undrawn credit lines. At the end of last year's third quarter, Delta had $5.5 billion in unrestricted liquidity, including $3.9 billion in cash and $1.6 billion in undrawn credit lines.

Looking forward, Delta is cutting its flight capacity by 4 to 5 percent for the fourth quarter compared with the same period a year ago and expects the quarter to be profitable. Next year, the airline will cut capacity by 2 to 3 percent.

Meanwhile, Delta has been adding more extras that it can charge customers for, such as a premium economy section for a fee. The airline seeks to make an additional $1 billion in revenue from such merchandising by 2013.

Standard & Poor's analyst Jim Corridore issued a note to investors saying the firm expects Delta to benefit next year from capacity discipline, attempts to hike fares and good demand for air travel, "while oil remains a wild card."