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Delta Reports Quarterly Loss But Outlook is Positive

It's earnings season once again, and Delta and American both kicked it off today with quarterly losses. Despite the negative numbers, the outlook going forward was pretty positive for the same reasons I mentioned here two days ago. Oil is dropping and the hope is that the reduction in costs will offset weakening demand at the very least. Let's take a look at Delta's numbers. I'll have more on American tomorrow.

Delta announced a $26 million loss excluding special items. Passenger revenue was up 7.3% on a 1.4% decrease in capacity. In other words, they're getting a fair bit more out of their passengers (without charging a fee for the first checked bag, I might add). Yield was actually up 7.5%. Their "other" revenue, which includes fees and charges not in the ticket price, was up 23% to $579 million. With all this good news, you'd think that they were making money hand over fist, but that's because we haven't looked at the cost side yet.

Needless to say, fuel costs were up. They paid $682 million more for fuel year over year for a total fuel cost increase (including taxes and hedges, I believe) of more than $800 million. It's hard to offset $800 million year over year, but now that fuel is down around the levels we saw last year, that should somewhat evaporate. (No, it won't completely disappear since there are some hedges in place at higher levels.)

Delta was also kind enough to give us some guidance for the fourth quarter and full year. Other revenue should increase from $579 million to around $700 million. Fuel prices should settle back down to $3.21 a gallon vs $3.45 in the third quarter. Unit revenue should again make strong gains and the airline expects a 1 to 3% operating margin excluding special items. A profit during the generally weaker fourth quarter would be quite an achievement, but it makes sense considering the reduction in fuel costs.

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