Delta Air Lines narrows loss

/ Source: The Associated Press

Delta Air Lines said it is selling 11 planes and delaying delivery of eight more aircraft as it reported a narrower loss in the third quarter amid signs more financial challenges may lie ahead.

The airline said Tuesday it lost $168 million, or $1.36 a share, for the three months ending Sept. 30 compared to a loss of $330 million, or a $2.67 a share, for the same period a year ago.

Excluding one-time items, including charges and gains related to debt and writedowns on planes and spare parts, Delta said it lost $172 million, or $1.43 a share, for the July-September quarter. Analysts surveyed by Thomson First Call expected a loss of $1.46 a share excluding one-time items.

Revenue rose to $3.44 billion from the $3.42 billion for the same quarter a year ago.

“Over the past two years, our industry has undergone dramatic, permanent changes,” chief executive Leo Mullin said. “Today’s results, while somewhat better than we expected, show that Delta’s challenges are not yet over.”

Mullin said the airline is making strategic changes to deal with its financial situation, including altering its fleet.

Delta said it has reached an agreement with an unnamed third party to sell 11 Boeing 737-800 aircraft that had been scheduled for delivery to the airline in 2005. The transaction is expected to reduce the company’s capital expenditures by $500 million.

In addition, Delta will defer until 2008 delivery of eight more Boeing 737-800 aircraft that also were scheduled for delivery in two years. Delta said it will accept delivery of two other Boeing aircraft in 2005.

The earnings report comes as Delta continues to cut costs. The airline has laid off 16,000 employees since the 2001 terrorist attacks.

Last week, Delta told its flight attendants it was imposing new work rules that blend their base and overtime pay. Some of Delta’s 14,000 flight attendants are worried the rules will mean less money and lower pension benefits. But Delta says the changes will allow workers to earn more and at the same time save the company $40 million a year through increased productivity.

In late June, Delta and its pilots union opened talks to discuss wage concessions. Those talks later stalled and have not started anew. Delta has said it wants to cut pilots’ hourly wages by 22 percent, rescind a 4.5 percent raise the pilots received May 1 and eliminate a similar raise due next May.

Delta also launched its discount carrier, Song, in April as part of its plan to return to profitability. A component of that plan was an initiative to reduce non-fuel costs by 15 percent by 2005.

Delta has said Song has been performing better than expected.

In addition to the cost cuts and new profit-driving initiatives, Delta made changes to its controversial executive compensation program for 35 top executives. The changes included Delta canceling the final payment to current participants of its supplemental executive retirement plan and discontinuing the program, which would have been fully funded at $65 million by next year.

For the first nine months of the year, Delta lost $458 million, or $3.71 a share, compared to a loss of $920 million, or $7.46 a share, a year ago. Nine-month revenue was $9.905 billion compared to $9.997 billion in 2002.