Losses widen at Delta, Northwest

Delta and Northwest, seeking to combine to create the world’s largest airline, posted losses Wednesday totaling $10.5 billion for the first quarter due to high fuel prices and write-downs of their companies’ value.

The red ink put into focus the enormousness of the challenge the airline industry faces to become profitable again amid nearly $120-a-barrel oil -- even with the benefits that consolidation can bring.

“All airlines are in the same boat,” Calyon Securities analyst Ray Neidl said. “The industry cannot make money at the current ticket fare levels. Seats have to come out of the market. To cover higher fuel costs, air fares have to go up.”

Atlanta-based Delta Air Lines Inc. said its loss widened in the first quarter to a whopping $6.39 billion. A few hours later, Eagan, Minn.-based Northwest Airlines Corp. reported a $4.1-billion loss.

Delta’s results badly missed Wall Street expectations despite a 12% increase in sales.

Excluding special items -- primarily a $6.1-billion non-cash charge relating to the drop in Delta’s market value due to sustained record fuel prices -- the airline lost $274 million in the first quarter.

Northwest took a $3.9-billion charge related to its market value decline. Its loss came despite a 9% hike in sales, and Northwest also missed analysts’ earnings expectations.

Excluding the accounting charge and losses from some fuel hedges, Northwest said it would have lost $191 million in the quarter.

Both airlines have been hampered by the steep rise in fuel prices. Delta recorded a $585-million, year-over-year increase in the cost of fuel in the first quarter, while Northwest’s fuel costs increased $445 million from a year earlier.

When it emerged from Chapter 11 protection a year ago, Delta said its stock would be worth $9.4 billion to $12 billion in all. Delta’s current market value is roughly $2.6 billion.

Delta shares fell 24 cents, or 3.5%, to close at $6.56. Northwest fell 37 cents, or 5%, to $7.10.