Wednesday morning, Delta Air Lines Inc. (DAL) reported a net loss for the second quarter on charges related to goodwill and other intangibles and amid higher fuel prices. However, the company reported a profit for the quarter excluding charges. Revenue for the quarter increased 10% from the year-ago period.
In June, the company had said it expects to post a profit in the second quarter, excluding one-time items. Airline companies in the U.S. have been hurt by rising fuel costs, a slowing economy and receding travel demand.
With rising fuel costs, the market recession in the U.S, and intensified competition, Delta and other airline operators hope to limit the damage to profitability by reducing capacity and maximizing gains through efficiency.
For the second quarter, the company's net loss was $1.04 billion, or $2.64 per share compared to net income of $1.59 billion in the prior-year quarter.
Delta said it incurred more than $1 billion increase year-over-year in fuel input costs related to higher oil prices. Special charges for the quarter were $1.2 billion, net of tax, primarily related to impairment of goodwill and other intangibles.
Excluding special and reorganization items, the company reported a net income of $137 million, or $0.35 per share, compared to net income of $274 million in the year-ago period. On average, ten analysts polled by First Call/Thomson Financial expected earnings of $0.10 per share for the quarter.
The decline in adjusted net income compared to the prior-year quarter was due to unprecedented fuel prices, partially offset by higher operating revenue from the company's international expansion.
During the quarter, Delta hedged 49% of its fuel consumption resulting in an average fuel price of $3.13 per gallon. Delta realized $313 million in gains on fuel hedge contracts settled during the quarter.
Total operating revenue for the quarter increased to $5.50 billion from $5.00 billion in the same quarter last year. Analysts had a consensus revenue estimate of $5.39 billion for the quarter.
For the second quarter, Delta's traffic grew 2.2% to 32.27 billion revenue passenger miles, while capacity increased 1.6% to 38.74 billion available seat miles and passenger load factor advanced 0.5 points to 83.3%.
Commenting on the results, Richard Anderson, Delta's chief executive officer said, "When faced with the challenge of unprecedented fuel prices, Delta distinguished itself by reacting quickly and decisively with strong topline growth, domestic capacity rationalization, cost initiatives, fuel hedging, and a focus on preserving liquidity -- while continuing to run a great airline and deliver exceptional customer service."
Delta said that it has targeted to close its merger with Northwest Airlines Corp. (NWA) during the fourth quarter of 2008. The company expects about $500 million in annual merger-related synergies in 2009, increasing up to the full run-rate of about $2 billion in annual synergies by 2012.
Cash integration costs are expected to be about $600 million over three years.
The company said that during the second quarter, it reevaluated its flight schedule, targeting additional reductions in capacity. Delta targets to remove the equivalent of 100 regional aircraft from the system by the end of the year. Delta now expects system capacity for the second half of 2008 to be down 4% compared to 2007, with domestic capacity down 13% and international capacity up 14%.
In addition, the company expects to cover about $3 billion of the estimated $4 billion raw impact of higher fuel input costs in 2008 through revenue and cost initiatives, including expansion of its international network and utilization of its fuel strategy.
Delta expects to end the year with a liquidity position of $3.2 billion, including $1 billion available under its revolving credit facility.
DAL closed Tuesday's regular trading session at $4.67, up $0.03 on a volume of 15.19 million shares. The stock has been trading in a range of $4.00-$21.80 in the past 52 weeks.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.