Delta loses $2B in second quarter
By Harry R. Weber
Associated Press
ATLANTA — Delta Air Lines Inc. yesterday reported a nearly $2 billion second-quarter loss — its worst ever in a three-month period — but investors were not deterred as the ailing carrier's pilots union said it is close to making a new wage concession proposal to management.
Union spokeswoman Karen Miller said pilots will present Delta with a comprehensive proposal in the "very near future," though she insisted that a rumor that the sides are nearing an agreement is false.
The company, which is based in Atlanta, which has warned of the possibility of bankruptcy if it doesn't get deep wage cuts from its pilots, would not comment on the speculation.
Gerald Grinstein, Delta's chief executive, told analysts the company's intent regarding pilot wage cuts is to "avoid a piecemeal response." He said Delta wants to "do it once and do it right."
Delta's shares rose 8 percent.
The stock boost also came as Delta announced that it ended the quarter with $2 billion in unrestricted cash on hand and it has arranged third-party financing resulting in $150 million of incremental liquidity.
Even so, Delta's overall results were worse than Wall Street's expectations, and executives said the airline needs to reinvent itself to deal with the growing challenge presented by low-fare carriers who have been able to call the shots on ticket prices.
"We must find the Delta solution that works for us," Chief Financial Officer Mike Palumbo said. "Clearly, we have a lot of work ahead."
The nation's third-largest airline said its net loss for the three months ending June 30 was $1.97 billion, or $15.79 a share, compared with a profit of $180 million, or $1.40 a share, in the same three-month period a year ago. Delta has lost more than $5 billion and laid off 16,000 employees in the past three years.
The second-quarter loss includes $1.65 billion in previously announced non-cash charges and $5 million in dividends paid out to preferred shareholders.
Spokeswoman Meghan Glynn said the reported loss was Delta's worst ever in a quarter.
Excluding the charges, Delta said it lost $312 million, or $2.55 a share, in the April-June quarter. Analysts surveyed by Thomson First Call were expecting a loss of $2.46 a share.
Revenue in the second quarter rose 13.3 percent to $3.96 billion, compared with $3.50 billion a year ago.
Last week, Delta warned it would be taking the hefty charges and said it will no longer recognize income tax benefits, which will boost its future net losses.
The charges were taken in part because Delta's actual and projected financial performance for 2004 has been significantly hurt by higher than expected fuel costs and lower returns from its U.S. business.
Some of the charges also are because of an increase in pilot retirements. About 300 pilots retired in June. Most were early retirements.
For the first six months of the year, Delta said it lost $2.36 billion, or $18.95 a share, compared with a loss of $290 million, or $2.35 a share, in the year-ago period.
Six-month revenue was $7.49 billion, a 9.8 percent increase from the $6.82 billion recorded a year ago.
Shares of Delta rose 44 cents, or 8 percent, to close at $5.94 in trading yesterday on the New York Stock Exchange.
