Delta Narrows Quarterly Loss

[nandagopal]

Delta Air Lines Inc., the world's biggest airline operator, said Tuesday it was hit hard in the first quarter by the weak economy and bad bets on fuel hedges, but narrowed its net loss to $794 million.

The Atlanta-based company said it would immediately institute a $50 fee for most passengers to check a second bag on an international flight for travel beginning July 1. The company expects to generate more than $100 million annually from the new fee. Delta already charges fees for the first and second checked bags on domestic flights.

It also said that it will ground its entire fleet of 14 B747-200 freighter aircraft in its cargo unit effective Dec. 31, due to the age and inefficiency of the aircraft.

Delta said the loss for the three months ended March 31 was 96 cents a share, and compares to a loss of $6.39 billion, or $16.15 a share, for the same period a year ago.

Revenue increased 40 percent to $6.68 billion, but that was skewed by Delta's acquisition of Northwest Airlines in October. In the year-ago quarter, before the acquisition, Delta posted revenue of $4.77 billion.

Excluding special items, Delta said its first-quarter loss was 84 cents a share. Analysts polled by Thomson Reuters, who generally exclude one-time items from their estimates, expected Delta to post a loss of $1.01 per share for the first quarter on sales of $6.7 billion.

Delta, like other airlines, has been cutting jobs and capacity to weather the global economic downturn.

Delta previously said it will reduce international capacity by 10 percent beginning in September. As a result, in the December 2009 quarter, Delta expects system capacity to be down 6 percent to 8 percent and international capacity to be down 9 percent to 11 percent, year-over-year.

Elite frequent fliers and active military are exempt from paying Delta's new fee for a second checked bag on international flights. The first checked bag on international flights remains free.

Delta said it posted $684 million in realized fuel hedge losses in the first three months of the year. As oil prices soared to $147 a barrel last July, many airlines hedged a portion of their future fuel needs. When market prices came tumbling down in the months that followed, some airlines were stuck with those hedges and had to pay higher prices for a portion of their fuel.

Delta ended the quarter with $5 billion in unrestricted

liquidity, which was unchanged from the balance at Dec. 31, 2008.