Tags: Earns | Delta Air Lines

Delta Air Lines Loss Widens to $318 Million

Tuesday, 26 Apr 2011 01:12 PM

Delta Air Lines Inc. said Tuesday that raising fares should allow it to make up for the higher fuel prices that drove a $318 million loss in the first quarter.

Delta President Ed Bastian said "aggressive fare actions" should allow it to cover the higher cost of fuel. The airline's goal is to raise fares enough to cover "the full cost of fuel on every flight, every day," according to a memo to employees from Chief Financial Officer Hank Halter.

Delta's fuel bill rose 29 percent, or $483 million, compared to a year earlier. Those higher ticket prices boosted revenue 13 percent, to $7.75 billion.

Airlines have raised fares seven times this year as their fuel bills have increased. They're walking a line between covering their higher costs and scaring away price-sensitive customers.

Besides higher fares, Delta is making plans to cut the amount of flying it does in the second half of the year by 4 percentage points. It said reductions would be focused in markets where fare increases have not kept up with rising fuel costs. However, it increased flying capacity 5 percent during the first quarter, and capacity will rise as much as 4 percent during the second quarter, compared with the same periods last year.

The loss for the quarter that ended March 31 worked out to 38 cents per share. A year ago, Delta lost $256 million, or 31 cents per share. Analysts surveyed by FactSet expected a loss of 50 cents a share and revenue of $7.61 billion.

Other factors in the loss included winter storms that hurt revenue by $90 million, and the March 11 earthquake and tsunami in Japan, which hurt first-quarter revenue by $35 million.

Airlines can hedge against higher fuel costs by making financial bets that benefit when oil prices rise. That helps, but it's not a cure-all. Including hedges, Delta paid $2.89 per gallon in the first quarter. Even with 49 percent of its second-quarter fuel hedged, it still expects to pay $3.26 per gallon. It has hedged 40 percent of its fuel for the third-quarter and 20 percent for the fourth quarter.

Last week United Continental and American reported quarterly losses on fuel expenses as well. Southwest Airlines Co. reported a small profit. US Airways Group Inc. said its first-quarter net loss more than doubled to $114 million.

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Delta Air Lines Inc. said Tuesday that raising fares should allow it to make up for the higher fuel prices that drove a $318 million loss in the first quarter. Delta President Ed Bastian said aggressive fare actions should allow it to cover the higher cost of fuel. The...
Earns,Delta Air Lines
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2011-12-26
Tuesday, 26 Apr 2011 01:12 PM
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