Aid Enables Airlines to Return to Profit

Delta Air Lines Inc., Northwest Airlines Corp. and Continental Airlines Inc. said Thursday that they returned to profit after two years of losses, helped by government security aid.

Second-quarter net income was $184 million for Atlanta-based Delta, the third-biggest U.S. airline; $227 million for No. 4 Northwest, based in St. Paul, Minn.; and $79 million for Houston-based Continental, the fifth-largest airline. All three said they would have had losses without the federal money.

The U.S. government provided $2.3 billion to 66 carriers in May, after the Iraq war and severe acute respiratory syndrome, which originated in Asia, reduced travel demand. Airlines already had been trimming fares, cutting wages and jobs, grounding planes and closing facilities because of losses in a travel slump worsened by the Sept. 11, 2001, terrorist attacks.

“These are not earnings they earned,” said Darryl Jenkins, director of the Aviation Institute at George Washington University in Washington. “What we do not have back yet is revenue. This is the worst revenue environment I’ve ever seen.”

Airline stocks slumped Thursday amid a broad market decline. Delta fell $1.80 to $13.05 and Continental dropped $1.36 to $14.11, both on the New York Stock Exchange. Northwest slid 89 cents to $9.96 on Nasdaq.

U.S. aid resulted in gains of $251 million for Delta, $209 million for Northwest and $111 million for Continental. Congress approved the aid as part of a $79-billion measure to pay for costs of the Iraq war. The payments to each airline are based on the amount of security fees they paid since February 2002.

Delta’s net income, which was $1.40 a share, included the aid and $176 million from the sale of its stake in the computer-reservations system Worldspan. Sales fell 4.8% to $3.31 billion from $3.47 billion. In the year-ago period, the airline had a net loss of $186 million, or $1.54 a share.

Sales at Northwest fell 4.5% to $2.3 billion from $2.41 billion, hurt by the impact of SARS in Asia. Per-share net income was $2.45. Its year-earlier net loss was $93 million, or $1.08 a share.

Excluding the government aid and $199 million from the sale of its stake in Worldspan, as well as expenses of $21 million to lower the value of some aircraft, Northwest would have had a loss of $160 million, or $1.86 a share.

Continental’s sales rose 1.1% to $2.22 billion as the airline cut costs and increased traffic at its regional division. Per-share net income was $1.10. In the same quarter of 2002, its net loss was $139 million, or $2.18 a share.

Excluding the government aid and an $8-million cost for deferring aircraft deliveries, Continental would have had a loss of $24 million, or 37 cents a share.