Delta's New World Order
The biggest surprise in the airline industry may be taking off in Atlanta.
Conventional wisdom has it that Delta Air Lines (DALRQ) is trapped in a downward spiral, fueled by a flawed strategy to boost revenue by throwing capacity at any international destination with an airport.
A top Delta executive disagrees, saying the airline industry will abandon that view in just a few months.
"The second quarter will drop some people's jaws," says Executive Vice President Glen Hauenstein in an interview. "It will change they way people think [about] how this airline is digging out from a $2 billion loss last year."Hauenstein, who oversaw the international expansion behind the turnaround of Continental Airlines (CAL), has mapped out a similar strategy for Delta. "We have international expansion as far as the eye can see," he says, adding that the airline's goal is to do 50% of its business overseas within three years. That exceeds the carrier's previously announced intent to have international flying account for 35% of systemwide revenue by the end of this year, up from about 20% in June 2005.
Steady BuildDelta had a good day on Wednesday. The company's pilots voted to approve a three-year contract agreement that is expected to save Delta $280 million annually, and the bankruptcy court approved the deal. Meanwhile, the airline reported improved financial results for April. It lost $27 million, compared with a $163 million loss in the same month a year earlier. Costs per available seat mile were 7.26 cents, a 3.8% decline. Passenger revenue per available seat mile was 10.97 cents, representing a 17.1% improvement. "While our progress is encouraging, we're still at the bottom of the industry in terms of financial performance," says Chief Financial Officer Ed Bastian. "We have a plan for long-term viability, and it's working, but we still have a lot of work to accomplish before declaring victory."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV