Delta Cites Labor Problems, Economy in Loss Warning

Delta Air Lines Inc., which is in tough labor talks with its pilots, said Tuesday that it expects to report a first-quarter loss due to flight reductions, a weakening economy and consumer avoidance because of a possible strike.

The No. 3 U.S. airline said in a Securities and Exchange Commission filing that it expects to post a net loss of $85 million to $110 million, or 70 cents to 90 cents a share, for the quarter ending in March.

Analysts on average were expecting Delta to post earnings of 46 cents, according to First Call/Thomson Financial.

In New York Stock Exchange trading, Delta shares, which traded as high as $53.31 in the last year, fell $1.64 to close at $41.46.

Analysts said a profit warning was expected as estimates headed south for many airlines amid U.S. economic weakness and labor problems with certain unions. But they were surprised by the amount of Delta’s shortfall.

“We would have guessed that a more probable guidance range would be zero to 20 cents profit,” said Samuel Buttrick of UBS Warburg.

Buttrick lowered his first-quarter estimate for Delta to a loss of 70 cents a share from a profit of 60 cents.

Robert Milmore, an analyst at Arnhold & S. Bleichroeder, said the big risk for airlines is economic weakness.

Delta said in its filing that the economic downturn has resulted in weaker business traffic, and estimated that it could have a revenue shortfall of $200 million to $250 million for the March quarter. It added that revenue also could be reduced by the same amount for the quarter ending in June.

Milmore said unresolved labor disputes also could pose problems for Delta and other carriers. Delta is in a showdown with its pilots over pay, job protection and other benefits, and its pilots union has approved a strike.

A spokesman for Delta said the carrier’s advance bookings suggest that fears of a strike may be driving away some passengers.

Delta began negotiations with the Air Line Pilots Assn., which represents about 9,800 pilots, in September 1999.

When a 90-day deadline to reach a settlement under mediation expired Feb. 28, Delta and the union asked the National Mediation Board to make an offer of arbitration, a move that brings the sides closer to a 30-day cooling-off period, after which the pilots could strike.

Mediators have yet to respond to the request and have scheduled a session with both sides for Thursday.