- The Washington Times - Monday, April 20, 2009

ATLANTA (AP) - Delta Air Lines Inc. reports first-quarter results on Tuesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The Atlanta-based company, which is the world’s largest airline operator, is expected to post a loss for the January-March quarter.

The news would follow sizable first-quarter losses reported last week by discount carrier Southwest Airlines Co. and the parent of American Airlines.

The economic downturn in the U.S. and other parts of the world has significantly reduced demand for air travel. Airlines have made deep cuts in capacity, but in the first three months of the year still had difficulty filling their available seats. Business travel, in particular, has been weak.

Analysts currently expect Delta to be profitable in the second quarter, which began April 1, and for the remainder of the year.

A spike in fuel prices or a significant further drop in demand could change those projections.

Any signs of improvement in the revenue and demand picture are welcome for an industry that has been struggling. Delta’s cash position and ability to raise additional cash also will be key indicators of its financial health going forward.

If advance bookings for travel during the usually busy summer period are much lower than a year ago, that could be a bad sign.

Delta said on March 10 that it will cut international capacity by an additional 10 percent starting in September, a move that will likely mean more job reductions.

The capacity cuts are in addition to Delta’s announcement in December that it will cut systemwide capacity in 2009 by 6 percent to 8 percent.

At the time of last month’s announcement, Delta did not provide an updated projection for its planned systemwide capacity reduction for 2009.

Delta has said the international capacity reductions will be targeted to areas where Delta has seen the most revenue weakness _ the Atlantic and Pacific networks. To achieve the reductions, Delta will exit low-performing markets, adjust frequencies and move some markets to seasonal service.

The airline has said that it still plans to increase Latin America capacity in the fourth quarter.

Delta subsidiaries include Northwest Airlines, Comair, Compass and Mesaba. It has hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City, Amsterdam and Tokyo-Narita. Delta, Northwest and Delta Connection carriers offer service to 368 destinations in 66 countries and serve more than 170 million passengers each year. The company has more than 80,000 employees.

BY THE NUMBERS: Analysts polled by Thomson Reuters, on average, expect Delta to post a loss of $1.01 per share for the first quarter on sales of $6.7 billion. Analysts’ projections generally exclude one-time items. On a net basis, the airline posted a loss of $16.15 per share on revenue of $4.77 billion a year ago, prior to Delta’s acquisition of Northwest.

ANALYST TAKE: Stifel, Nicolaus & Co. analyst Hunter Keay said in an April 6 research note that his firm remains cautious about the revenue outlook for the summer. “We share investor optimism that better times are likely to come, but we believe there is more potential bad news still to be priced into airline stocks after first-quarter earnings,” he wrote. “However, for those willing to wait out near-term hurdles we would advise buying shares of Delta, which are among the more inexpensive in our coverage and carry with them relatively low liquidity risk.” He said Delta is well positioned over the longer term to gain market share, particularly if the current demand crisis results in bankruptcies of undercapitalized competitors.

WHAT’S AHEAD: Delta executives have said they will continue to act quickly and decisively to address economic pressures for the remainder of 2009 and into 2010. Fare sales in the airline industry are expected to continue in the months ahead if the economy remains weak.

STOCK PERFORMANCE: Delta shares fell more than 53 percent during the first quarter. The stock closed at $12.13 on Jan. 2 and ended the quarter March 31 at $5.63.

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On the Net:

Delta Air Lines Inc.: http://www.delta.com

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