Merger costs and bad fuel hedging hit airline
Delta Air Lines reported a $1.4bn loss today (January 28) blaming merger costs and "out-of-period" fuel hedging.
The American carrier said $900m, the majority of its loss, resulted from charges associated with its merger with Northwest Airlines last year.
A further $91m loss was blamed on fuel hedging above market value.
Delta said it would have reported a $167m profit had it purchased fuel at the right price.
But Richard Anderson, Delta's ceo, said the continuing decline in the price of oil would help this year's results.
"Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," he said.
The airline said it expects its merger with Northwest to generate $500m in synergies in 2009 and $2 billion by 2012.
Delta defended its decision to slash passenger capacity over the second half of 2008, with numbers on all but Pacific routes down compared to 2007.
Domestic routes saw the greatest reduction from "capacity discipline", with 13.4% fewer travellers over Q4.
"Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand," said Edward Bastian, Delta's president.
"We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline."
Now the world's largest airline, Delta reported $6.7bn in operating revenue and $6.1bn in total liquidity.
The overall loss represents $0.50 per share. Delta's share price fell 4.3% to $9.50 at close of trading in New York yesterday.