Cost of Fuel Hits Delta’s Results

Delta Air Lines, struggling to secure major cost cuts to avoid a possible bankruptcy filing, Monday posted a second-quarter loss of nearly $2 billion because of a spike in fuel prices and a one-time charge related mostly to taxes.

But shares of the No. 3 U.S. carrier rose 8% as the company said it had more than $2 billion in cash on hand at the end of the quarter and recorded positive cash flow from operations in the period. The carrier also said it was making progress in identifying ways to cut costs.

Still, Chief Executive Gerald Grinstein, in a conference call with analysts, said the pressures facing the airline continued to increase.

“The hole we must fill is considerably deeper today than it was a year ago, and the hole grows deeper every day,” Grinstein said. “The changes we make must be structural and permanent.”

The Atlanta-based carrier said its loss was $1.96 billion, or $15.79 a share, including the charge. A year earlier, it reported a profit of $184 million, or $1.40 a share, including a hefty one-time government aid payment.

Delta took a $1.65-billion charge in the quarter -- $1.53 billion related to deferred income taxes and $117 million related to its pilot pension plan as more pilots than usual retired.

The carrier’s fuel costs jumped 54% while yields, or average fares, continued to erode. It faces increasing competition from low-cost rivals and said it does not expect a revenue recovery anytime soon.

Delta has had seven bond downgrades since May 2003, the latest of which was Monday by Standard & Poor’s, which cited a growing chance the airline would file for bankruptcy protection or restructure its debt.

Delta is in negotiations with its pilots, its only major union and the highest-paid pilots in the industry. The union plans to present a new proposal of concessions to management soon, and the head of the union said he was looking to increase pilot productivity.

Analysts called the results good relative to expectations, but poor overall. Excluding the charge, Delta’s loss was $312 million, or $2.55 a share. Analysts expected a loss of $2.41 a share.

Delta shares rose 44 cents to $5.94 on the New York Stock Exchange.