Delta, Northwest post 1st-quarter losses

Both Delta and Northwest are joining other airlines in parking planes and boosting fares to help cover rising jet fuel costs. (Don Ryan/Associated Press)

ATLANTA -Delta Air Lines Inc. and Northwest Airlines Corp. blamed surging fuel prices for first-quarter losses as they prepare to combine and form the world's largest carrier.

Their deficits mean that all five of the biggest US airlines were unprofitable last quarter, when jet fuel prices jumped 63 percent from a year earlier.

Delta and Northwest are joining peers in parking planes and boosting fares to help cover the rising costs.

"They figure, 'Look, we can't run these routes at a loss.' So they're cutting back," Daniel Kasper, managing director of consulting firm LECG Corp. in Cambridge, Mass., said in an interview. "That will help firm up prices."

Delta's loss, before a bankruptcy-related charge, was $274 million, or 69 cents a share. Northwest said its deficit was $191 million, or 78 cents, before costs also related to its bankruptcy. Analysts expected narrower losses.

Both airline's closing share prices were the lowest since they started trading as part of the airlines' exit from court protection. Atlanta-based Delta left bankruptcy on April 30; Northwest followed on May 31.

Yesterday's back-to-back earnings reports gave Delta chief executive Richard Anderson and Northwest chief Doug Steenland a platform to promote the tie-up they disclosed April 14.

Delta is buying Northwest in an all-stock transaction valued at $2.3 billion, down 36 percent since it was disclosed.

The deal will produce more than the $1 billion in revenue and savings originally forecast, the executives said yesterday.

"We were conservative in the estimates of the synergies," Steenland said on a conference call. "As the process goes forward and gets more detailed, I'm highly confident that number will increase."

The losses by Delta and Northwest pushed the first-quarter deficit among major US carriers to $1.38 billion.

US Airways Group Inc. is expected to post a loss today, based on analysts' estimates, meaning the total for the eight biggest US airlines probably will top the $1.4 billion projection of Merrill Lynch & Co. analyst Michael Linenberg.

Including a $6.1 billion noncash cost linked to a drop in its market capitalization since bankruptcy, Delta's deficit was $6.39 billion, or $16.15 a share.

Delta's loss was driven by a jump of $585 million, or 50 percent, in spending on jet fuel. The price Delta paid per gallon climbed 48 percent to $2.85. Revenue rose 12 percent to $4.77 billion.

"There is no doubt that sustained high fuel prices are a serious threat to this industry," chief financial officer Ed Bastian said.

Without the bankruptcy-related cost, Delta's per-share loss exceeded the 51-cent average of 12 analyst estimates compiled by Bloomberg.

Northwest's loss, including a $3.9 billion noncash expense and other costs, was $4.1 billion, or $15.78 a share, the Eagan, Minn.-based carrier said. Sales rose 8.8 percent to $3.13 billion.

Spending on jet fuel jumped 58 percent, to $1.11 billion, according to Northwest, the fifth-largest US carrier by traffic.

Excluding the $3.9 billion charge, Northwest was expected to have a loss of 34 cents a share, the average of estimates from nine analysts compiled by Bloomberg.