Delta Turns a Profit

The airline lost $46 million in the third quarter excluding special items.
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Delta Air Lines

(DALRQ)

lost $46 million in the third quarter excluding special items, as September losses of $134 million partially limited its improvement from a year earlier.

For the same quarter a year ago, Delta lost $438 million, excluding special items. With items, including reorganization costs related to its continuing bankruptcy, Delta reported net income of $52 million in the latest quarter. Delta's margin was 3.6%, an improvement of 9.2 points.

"Our restructuring efforts continue to result in significant year-over-year improvements to both our operating income and margin,'' said CFO Ed Bastian in a prepared statement. "Despite the nearly $250 million impact of higher fuel prices, we improved our operating profits by more than $300 million for the quarter."

Mainline passenger revenue per available seat mile rose 12.9%, a result of higher ticket prices and an initiative to shift capacity from domestic to international flights. Domestic passenger RASM rose 18.1%, while international passenger RASM rose by 3.3%, despite a 22% increase in international capacity during the year.

In September, Delta's passenger RASM, adjusted for flight length, was equal to 92% of industry average, up from 84% for the same month last year. The $134 million September loss excludes special bankruptcy-related items.

Operating revenue during the quarter totaled $4.66 billion, up 8.1% despite a 3.4% drop in capacity and an estimated $40 million negative impact from new security measures imposed in August.

Mainline cost per available seat mile, excluding fuel and special items, fell 4.8% to 6.77 cents. Operating expenses for the quarter fell by 1.3%, or $57 million, even after a $246 million increase in fuel costs. Salary expenses fell by 18.4% to $1 billion, and the cost of contracts with regional airlines rose by 131% to $724 million.

Delta, which has returned or sold 123 planes during its bankruptcy, said it will reduce its fleet by at least 20 additional regional aircraft. For 2006, capacity will decline by 7%, with domestic capacity down 14% and international capacity up 22%.

The airline reiterated that its shares currently outstanding will be canceled and have no value when it emerges from bankruptcy protection in the first half of 2007.