Delta Air Lines ( DAL) beat expectations for the first quarter and said it will be profitable this year, despite "significant pressure" on revenue due to the global recession.

Excluding special items, the carrier lost $693 million, or 84 cents a share, in the quarter. Analysts surveyed by Thomson Reuters had estimated a loss of $1.01. Revenue was $6.7 billion, in line with estimates. Including items, the loss was $794 million, or 96 cents a share.

"Despite signs of stabilization in recent demand trends, we expect the revenue environment to continue to be under significant pressure for the remainder of the year," said President Ed Bastian, in a prepared statement. "We believe lower fuel prices, combined with a focus on accelerating merger synergies and other initiatives will more than offset the revenue decline."

The results mean that both AMR ( AMR) and Delta, the world's two biggest airlines, beat expectations for first-quarter results, although both reported losses and cited difficult conditions going forward.

Delta CFO Hank Halter noted that "despite a decline in our expected revenue outlook, we continue to project a profit for the year, as well as grow our unrestricted liquidity to more than $6 billion by the end of the year." As of March 31, Delta had $5 billion in unrestricted funds, including $4.5 billion in cash.

Cargo revenue, particularly hard hit, fell by 44%, or $146 million. Delta announced that on Dec. 31, it will ground the Northwest fleet of 14 Boeing 747-200 freighters.

Additionally, the carrier said that starting July 1, it will charge international passengers $50 to check a second bag. The move is expected to generate more than $100 million annually. During the past quarter, other net revenue increased by 18%, or $137 million, primarily due to increased baggage fee revenue.

Delta noted it would have broken even but for realized fuel hedge losses and special items. "Despite the worst economic recession in our lifetime, the fundamental strength of Delta's business allowed us to deliver break-even results this quarter, excluding fuel hedge losses and special items," said CEO Richard Anderson.

Results included about $100 million in benefits from the October merger with Northwest, which boosted revenue by 40%. However, operating revenue fell by $1.2 billion, or 15%, a result of the global recession and a 6% capacity decline.

Passenger revenue per available seat mile declined 12%, driven by a 9% decrease in yield and a 3% drop in load factor. Passenger RASM declined in every segment, led by a 19.7% pullback in the trans-Atlantic, where capacity increased by 1.3%.

The Pacific was the best performing segment, with a passenger RASM decline of 2.8%. Mainline passenger RASM fell by 12.2% on a 7.3% capacity cut. Consolidated passenger revenue was down 12.1% following 6.4% capacity reduction.

As previously announced, Delta will reduce international capacity by 10% starting in September. As a result, in the fourth quarter, system capacity will be down 6% to 8%, with international capacity down 9% to 11%.

Mainline cost per available seat mile, excluding fuel and special items, rose 5% to 7.76 cents due to higher pension expenses and cost pressures from capacity reductions.

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