Delta's Quarter Leaves Investors Unimpressed

Updated from 3:01 p.m. EDT

Shares of Delta Air Lines (DAL Quote) stumbled on Tuesday after the carrier halved its quarterly loss, but failed to match the increasingly optimistic tone seen from airline management in recent months.

Delta announced a third-quarter net loss of $164 million, or $1.36 a share, compared to a year-ago loss of $326 million, or $2.67 a share. Excluding all items, the carrier lost $172 million, or $1.43 a share, beating the loss of $1.46 a share expected by Wall Street.

While earnings topped overall expectations, revenue did not, with Delta's quarter coming in at $3.44 billion, less than the $3.47 billion expected by analysts. With airlines announcing stronger-than-expected September results, some analysts said better results could be coming from other airlines.

Delta shares ended down 96 cents, or 6.5%, at $13.74.

"Delta's quarter was a bit shy of our more aggressive estimate, but in line with consensus," said Gary Chase, analyst at Lehman Brothers, in a note. "We believe these results are less exciting than some will post in coming days, but principally because Delta reduced more capacity than others."

Indeed, Delta focused on cutting costs, paring down capacity and improving the efficiency of operations. For the quarter, the carrier logged 34.5 billion available seat miles, or ASMs, which is off 6.3% from the year-ago quarter. Meanwhile, traffic, or revenue seat miles, came in at 26.5 billion, down 3%, from year-ago levels.

With capacity down more than traffic, Delta's load factor, or the percentage of seats filled on every plane, rose to 76.9%. While that's still shy of the 78.8% Delta said it needed to break even in the third quarter, it continues Delta's trend of improving load factors.

Delta was able to boost passenger yields in the third quarter, coming in with a passenger mile yield of 12.06 cents, up 4.2% from the year-ago quarter. The rising yield represents a return to pricing power for the beleaguered airline industry, but analysts and Delta management were quick to note the company has much work to do when it comes to reducing costs.