Delta Sets Record for Red Ink
Delta Air Lines Inc. blamed high fuel prices, low fares and hefty charges as it reported the worst annual financial performance in the industry’s history Thursday, culminating with a $2.2-billion fourth-quarter loss.
Continental Airlines Inc. cited similar difficulties and posted a smaller-than-expected $206-million loss, bringing cumulative fourth-quarter losses reported so far by five large U.S. airlines to $3.17 billion.
A year earlier the five carriers, which include AMR Corp.’s American Airlines, Northwest Airlines Corp. and Southwest Airlines Co., reported a combined fourth-quarter profit of $33 million. The soaring cost of jet fuel was a huge drain on the industry in 2004, undermining the growth in passenger traffic as well as carriers’ efforts to reduce labor expenses.
Delta shares plunged 58 cents, or 9.8%, to $5.37 on the New York Stock Exchange, where Continental shares fell 8 cents to $9.37.
Delta’s results, which missed Wall Street’s lowered expectations, pushed the Atlanta-based carrier’s loss to $5.2 billion for all of 2004, dwarfing the previous record loss of $3.5 billion reported in 2002 by AMR.
Although 2005 is likely to be another tough year, Delta executives said their efforts to cut costs and attract more fliers was the right long-term strategy for the nation’s third-largest carrier.
“If Delta is to survive, we must develop a fundamentally different way of doing business, which is what we’re doing,” Chief Executive Gerald Grinstein said.
The plan includes job cuts, pilot wage reductions, restructured financing and a fare overhaul that has lowered Delta’s most expensive fares by as much as 50% on routes nationwide.
For the three months ended Dec. 31, Delta said its net loss was $2.21 billion, or $16.58 a share, compared with a loss of $332 million, or $2.69, a year ago.
Excluding one-time items -- $1.4 billion in non-cash charges -- Delta said it lost $780 million, or $5.88 a share. On that basis, analysts surveyed by Thomson First Call were expecting a net loss of $5.51 a share.
Revenue in the October-December period was $3.64 billion, an increase of 0.9% from $3.61 billion a year ago.
Houston-based Continental’s fourth-quarter loss amounted to $3.12 a share. The airline earned $47 million, or 61 cents a share, in the fourth quarter a year ago.
Excluding special items, Continental’s loss was $174 million, or $2.62 a share -- better than the Thomson First Call mean estimate of a loss of $3.29 a share.
United Airlines parent UAL Corp., US Airways Group Inc., America West Holdings Corp. and Alaska Air Group Inc. have yet to report results, but all are expected to report losses.
