Delta Air Lines posts $369 million second-quarter operating income, $207 million for June

By Caroline Salls

Pittsburgh, Aug. 9 - Delta Air Lines, Inc. reported a $369 million operating income for the quarter ended June 30 on revenues of $4.655 billion, according to a company news release.

The figures compare to a $129 million operating loss for the same quarter of 2005 on revenues of $4.249 billion.

Delta's second-quarter net loss was $2.2 billion, slipping from a net loss of $382 million in the second quarter of 2005.

In the second quarter, Delta recorded $2.4 billion in non-cash charges for reorganization items relating primarily to a $2.1 billion charge for the general unsecured pre-bankruptcy claim in conjunction with the pilot collective bargaining agreement and a $284 million charge primarily reflecting estimated pre- bankruptcy claims from restructuring the financing arrangements of 16 aircraft, the rejection of 14 aircraft leases and the return to the lessor of one aircraft.

During the quarter, Delta said it continued its substantial restructuring by reducing employment costs through a new comprehensive agreement with its pilots and a reduction in corporate overhead, restructuring its route network through significant international growth and lowering aircraft costs through negotiations, lease rejections and aircraft returns.

Delta said the increase in revenues reflected the positive impact of its strategic initiatives, including the restructuring of its route network and fare increases, which it said reflect strong passenger demand and capacity reductions in the airline industry.

As of June 30, Delta had $4.0 billion in cash, cash equivalents and short-term investments, of which $2.9 billion was unrestricted.

"Delta has made important progress toward our restructuring goals and remains on track to exit bankruptcy in the first half of 2007 - accomplishments that would not have been possible without the participation and commitment of all Delta people," chief executive officer Gerald Grinstein said in the release.

"With more work ahead of us to return to financial health, continued execution of our plan - including improving our product and providing superior service to our customers - will be crucially important going into the industry's less robust travel season."

According to the release, fuel prices rose 30% year-over-year to $2.08 per gallon, driving a 5% increase in consolidated unit costs.

However, as a result of the cost reduction initiatives included in Delta's restructuring plan, the company said mainline unit costs excluding fuel and prior year special items decreased 3.3%.

"Delta's second quarter results continue to reflect both the solid progress we are making in our restructuring and the substantial challenges we are facing from high fuel prices," executive vice president and chief financial officer Edward H. Bastian said in the release.

"Despite the more than $300 million impact of higher fuel prices, Delta produced its first quarterly net profit, excluding reorganization or special items, since December 2000."

For the quarter, Delta hedged about 34% of its fuel consumption, resulting in a $2 million gain, and as of July 31, Delta had hedged about 49% of its planned fuel consumption for the third quarter at an average price of $2.13 per gallon.

June results

For the month of June, Delta posted a $207 million operating income on $1.706 billion in revenues, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The figures show improvement over May's $78 million in operating income on revenues of $1.48 billion.

The net loss for June was $2.162 billion, compared to a $16 million net loss in May.

As of June 30, Delta had $2.43 billion in cash and cash equivalents, increased from $2.26 billion at the end of May.

Delta, an Atlanta-based airline, filed for bankruptcy on Sept. 14, 2005. Its Chapter 11 case number is 05-17923.

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