Delta Air Lines plans to continue nudging fares higher and trimming its flight scheduleafter posting a $318 million first quarter loss that executives blamed largely on higher fuel costs.
"We faced significant pressures on our business," Chief Executive Richard Anderson told analysts on a conference call Tuesday. Those pressures included a a 30 percent increase in fuel costs that added $610 million to expenses in the quarter, along with the effects of disasters in Japan and winter storms in the U.S.
Delta's first quarter loss was wider than its $256 million loss in the same quarter of 2010. It amounted to 38 cents a share, compared with a 31 cents a year earlier.
Still, Delta shares gained 11 percent on Wall Street, closing at $9.99, up 99 cents in regular-hours trading, after Delta's results beat analysts' expectations. Investors may also have been encouraged by a 13 percent gain in revenue for the quarter and Delta's expectations for double-digit unit revenue growth in the second quarter, indicating strong demand as the economy slowly recovers.
Fuel is adding a significant downdraft, however. Anderson expects Delta's fuel expense for the year to increase by $3 billion. Fare increases earlier this year only covered 70 percent of costs, Anderson said.
That "isn't enough," he said, added that where the airline can't offset increased costs, it will cut flight capacity. He emphasized the airline's interest in financial performance -- particularly on making an operating margin.
"This isn't a hobby," Anderson told the analysts.
The airline expects to cut its flight capacity after Labor Day by 4 percent compared with the same period last year. One of the weakest areas is trans-Atlantic flights, Anderson said.
Delta is also reducing its fleet by 140 aircraft over the next 18 months, as well as cutting capital spending.
President Ed Bastian, Delta's No. 2 executive, said the airline will continue to add fee-based products and services, such as its international premium economy section to launch in June, to boost revenue.
Severe winter weather, including the January snowstorm in Atlanta, cut Delta's fourth-quarter revenue by $90 million, while the earthquake, tsunami and nuclear crisis in Japan took another $35 million off the top line.
Despite the quarterly loss, Delta said it expects to be in the black in the current quarter that ends June 30.
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