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Delta's Revenue Rises as End of Chapter 11 Nears

The carrier reports a narrower first-quarter loss.
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Days before emerging from 19 months in bankruptcy and relisting its stock,

Delta Air Lines


is riding a crest of both domestic and international growth.

The carrier will likely emerge with the second-highest market capitalization in the airline industry, and with estimated pretax income of roughly $800 million in its first year back, CEO Jerry Grinstein said Monday, on a quarterly conference call Monday. "There is very little history of a company exiting bankruptcy and expecting to post results like this right out of the gate," Grinstein said.

Delta said its first-quarter net loss, excluding one-time and reorganization items, was $6 million, compared with a net loss of $356 million in the same quarter a year earlier. It said domestic passenger revenue per available seat mile (PRASM) grew 6.3%, while international PRASM grew 6.4%.

On the domestic side, Delta far exceeded the RASM growth reported last week by





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. Southwest was highest, at 1.4%. "Our demand for domestic is incredibly strong for the summer, but we hear everybody else saying it's down," said Glen Hauenstein, executive vice president. "Every day we look and say, 'Why are we living in this parallel universe?'"

One reason, he said, is that Delta shrank domestic capacity, down 5.4% in the quarter. Also, it has hubs in the fast-growing Southeast and Mountain West. "We are in the right places

and also are really building a network we are proud of in New York," said COO Jim Whitehurst.

Internationally, Delta RASM growth trailed double-digit growth at American and Continental. But Hauenstein noted that Delta added various international routes last summer and that "the spool up for international is a little bit longer than for domestic." He said unit revenue acceleration will increase going forward.

Delta is not worried about a slowdown in international growth because of its diversification, Whitehurst said. Growth to Europe is almost flat, he said, while flights are being added to the Middle East, Africa and Asia. "We're growing in areas where there is not a lot of service today," he said.

In growing internationally, Delta continues to benefit from operating the world's biggest hub, in Atlanta, where it offers about 1,000 daily departures. Competition is limited, Whitehurst said, because "if you don't have an East Coast hub, it's hard to do things like the EC and Africa." Among the locational advantages: The top connecting markets for Delta's Atlanta-Tokyo flight are Lima and Sao Paulo.

For the first quarter, after accounting for all items, Delta had a net loss of $130 million, compared with a net loss of $2.1 billion a year earlier. It reported an operating profit of $155 million, its fourth consecutive quarterly operating profit.

On the cost side, mainline cost per available seat mile declined by 8.7% to 7.06 cents, excluding fuel and special items. Delta's plan of reorganization is scheduled to be heard in bankruptcy court on Wednesday, and its existing stock is expected to be canceled a few days later.