Delta Air Lines 2008-2009 4th quarter losses

Delta Air Lines, based in Atlanta, Georgia, the United States, has reported considerable fourth-quarter losses which the airline blamed on higher costs of fuel and a non-cash charge related to stock options following Delta’s acquisition of Northwest Airlines.

Delta, the world’s largest carrier, said in a statement that it lost, for the recent quarter, $1.4 billion, or $2.11 a share, compared to a loss of $70 million, or 18 cents a share, in the same period a yea ago.

The airline said it was “hit by a $900-million non-cash charge related to employee equity awards in the most recent period, as well as a $91 million loss on out-of-period fuel hedges.”

On an adjusted basis, Delta Air Lines announced that it lost 50 cents a share.

While the carrier’s total operating revenue increased by 18% to $22.7 billion from $19.2 billion, costs leaped by 72% to $31 billion from $18 billion. The price of aircraft fuel and related expenses jumped by 55% to $7.3 billion from $4.7 billion, the Delta statement added.

Edward Bastian, president of Delta Air Lines, said in the statement: “Looking ahead, the company forecast a profitable 2009, driven by lower fuel costs, capacity discipline and merger synergies.” However, Bastian added that Delta’s “proactive decision to reduce domestic capacity in 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter.”

According to Edward Bastian, Detroit and Cincinnati have the “most weakness” among Delta’s hub-cities in the United States. Delta, he added, would soon change its fare structure in Cincinnati in an effort to enhance traffic. However, Bastian did not divulge details on prices or demand.

Delta said that, in 2009, it plans to get rid of 40 to 50 mainline aircraft from its fleet “as the airline eliminates the fixed-costs related to its 6% to 8% system-capacity reduction” and that it would “monitor the demand environment” and also could remove more aircraft if need be.

Besides, the carrier said it is offering its second phase of “voluntary workforce reduction” programme in 12 months with a view to “aligning more closely its staffing with lower capacity levels.”

As of December 31, 2008, Delta had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties, the company’s statement said.

Meanwhile, the combined traffic for Delta and Northwest Airlines (measured by miles flown by paying passengers) fell by 2.7% in the last quarter from the same period a year earlier.