Delta Air Lines expected to post fourth-quarter, full-year loss

Delta expected to post fourth-quarter loss

ATLANTA — Delta Air Lines Inc., the world’s biggest airline, reports fourth-quarter and full-year 2009 results on Tuesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Delta, based in Atlanta, is expected to post an adjusted loss for the October-December quarter.

The period includes the holiday travel season that ran from Thanksgiving through Christmas.

Weak demand for air travel made for a challenging 2009 for the airline industry, and Delta was no exception. Capacity cuts helped, but profits were still hard to come by as fewer business travelers took to the skies.

There have been signs of recovery and improving trends for airlines in recent months. But, they may also face higher costs from rising fuel prices.

At an investor conference last month, Delta said it expects to increase its cash balance in 2010 despite more than $1.1 billion in pension expenses and funding requirements planned for 2010.

The airline also projects it will end the year with $5.4 billion in unrestricted liquidity, up from the $5.3 billion it expected at the end of 2009.

Delta said capacity will be flat in 2010 compared to 2009.

The airline recently raised its fees to check a first bag on a domestic flight by $8 and by $7 for a second bag. That means it costs $23 for the first bag and $32 for the second.

It will continue to cost you even more if you don’t pay the fees in advance on the airline’s Web site and wait till you get to the airport. Delta calls it a surcharge — $2 for the first bag and $3 for the second.

Elite frequent fliers, first class fliers and certain other customers, including active military personnel on deployment, are exempt from the fees.

BY THE NUMBERS: Analysts polled by Thomson Reuters, on average, expect Delta to post a quarterly loss of 24 cents a share on revenue of $6.86 billion. Analysts’ projections generally exclude one-time items. The airline posted a net loss of $1.4 billion, or $2.11 a share, in the fourth quarter of 2008 on sales of $6.7 billion. Delta’s acquisition of Northwest Airlines was completed in the fourth quarter of 2008.

Delta forecast a $1.5 billion net loss for 2009.

ANALYST TAKE: Morgan Stanley analyst William Greene said in a Jan. 19 research note that Delta hitting or exceeding its targets for cost savings and revenue enhancement from its combination with Northwest would be a boon for investors. Greene also said Delta has a leaner cost structure than many of the major airlines thanks to the restructuring it and Northwest went through in bankruptcy protection from 2005 to 2007. Delta’s significant international/premium travel exposure is a positive in an economic recovery, Greene said. A potential negative, he added, is the risk of unionization across non-unionized work groups. Two of the airline’s biggest work groups have not yet resolved representation and seniority integration issues.

WHAT’S AHEAD: Delta is waiting to hear whether Japan Airlines will dump its alliance with American Airlines and join Delta’s SkyTeam alliance. Delta and its SkyTeam partners would give JAL $1 billion to leave oneworld for SkyTeam. American and its partners have offered $1.4 billion for Japan Airlines to stay. Delta is banking on its global network as a greater lure than the money. There’s been no recent word from Japan about when a decision will be made. Japan Airlines recently filed for bankruptcy protection and is planning a major restructuring.

STOCK PERFORMANCE: Delta shares rose 40 percent during the fourth quarter. The stock closed at $8.14 on Oct. 1 and ended at $11.38 on Dec.31.

On the Net:

Delta Air Lines Inc.: www.delta.com