Delta’s profit turnaround falls short of expectations
Delta Air Lines, one of the nation’s largest air carriers, reported higher profits Tuesday, indicating a continued rebound for the industry amid fears of increasing fuel costs.
The Atlanta-based carrier reported a profit of $19 million, or 2 cents a share, for the last three months of 2010, compared with a loss of $25 million, or 3 cents, for the same period in 2009. It marks the company’s first fourth-quarter profit since 2000.
The airline reported a profit of $593 million, or 70 cents a share, for the full year, in contrast to a $1.24-billion loss, or $1.50, for 2009.
Delta shares closed Tuesday at $11.70, down 8.2%.
Delta executives attributed the turnaround to increased demand and growing revenue from fees, such as checked baggage charges, as well as the company’s decision to resist adding extra aircraft and instead pack planes with passengers closer to capacity.
Airlines have increased fares three times in the last month, with Delta tacking on an additional $5 to $10 increase over the weekend.
Still, the airline’s results fell short of the expectations of analysts, who had predicted fourth-quarter profit of 24 cents a share. Delta executives attributed the shortfall to higher fuel costs and $45 million in losses caused by canceled flights amid bad weather in December. The airline also reported $88 million in expenses for the quarter to complete its merger with Northwest Airlines.
Fuel costs for the quarter jumped 13% to $1.93 billion compared with the same period in 2009, and
Delta executives predicted fuel costs would continue to be a topic of concern in 2011.
Richard Anderson, Delta’s chief executive, said increased profits brought about by the merger with Northwest and cost-cutting strategies will “give us momentum to deal with rising fuel prices we face in 2011.”
During a conference call, he predicted the airline’s profit margin would remain flat in 2011, partly because of increasing fuel costs. In a memo to employees, the company estimated it would spend $1 billion more on fuel in 2011 than the previous year.
Delta, which operates a fleet of more than 700 planes and employs about 75,000 workers, is the first major airline to report fourth-quarter earnings. Analysts expect every major U.S. carrier except AMR Corp., the parent company for American Airlines, to report a profit for the period.
