Delta reverses half-year losses

Delta Air Lines Inc reported its largest quarterly profit in a decade Monday, thanks to strong passenger revenue.

The world's largest airline said Monday its second-quarter net income was US$467 million, or 55 cents per share.

That reversed a year-ago loss of US$257 million, or 31 cents a share, when the airline industry was still reeling from the recession.

Delta's revenue rose 17 per cent to US$8.17 billion from US$7 billion a year earlier.

Excluding one-time items, Delta's earnings came to 65 cents a share. On that basis, analysts were expecting earnings of 63 cents a share on revenue of US$8.25 billion.

The strong results came even as Delta's expense for aircraft fuel and related taxes rose eight per cent in the quarter to US$1.96 billion.

Delta had US$6 billion in unrestricted liquidity, including US$4.4 billion in cash, as of June 30. Its third-quarter capacity will be flat to up two per cent.

Delta launched the earnings-reporting season for major airlines.

Delta said its momentum should continue. The airline expects to report double-digit year-over-year unit revenue gains for the September quarter.

In the latest quarter, passenger-unit revenue increased 19.4 per cent, driven by higher yields and occupancy. Cargo revenue increased 22 per cent.

Passenger-unit revenue is calculated by dividing passenger revenue by available seat miles, which are the available seats an airline offers, times the miles flown.

Passenger yield is the measure of the average fare paid per mile, per passenger, which is calculated by dividing passenger revenue by revenue-passenger miles.

Delta said its latest results included US$90 million in profit-sharing expense.

Chief Executive Richard Anderson said in a statement that the results are "proof that our plan has positioned us well as the economy begins its recovery."

The last time Delta reported a quarterly profit, close to what it reported in the latest quarter, was in the second quarter of 2000, when it posted net income of US$376 million.

For the first half of the year, Delta earned US$211 million, or 25 cents a share, compared to a loss of US$1.05 billion, or US$1.27 a share, a year earlier.

Six-month revenue rose to US$15.02 billion from US$13.68 billion.

The airline industry has been benefiting of late from increased demand for seats, especially among business travellers.

The fees they have been charging for checked bags and other services also have been helping their bottom line.

The total number of international passengers rose six per cent in the first five months of the year, according to the International Air Transport Association. Traffic at the front of the plane - the most expensive seats in business and first class - improved at an even faster clip.

But premium traffic fell further and faster in the recession than demand for economy class.

The IATA said recently that premium traffic is still 10 per cent below a pre-recession peak, while traffic in coach has jumped five per cent above its best point before the recession.

The financial health of Delta and other big airlines is an important indicator of consumer spending, but it can also provide a window into the future of fees and fares.

If Delta shows it is gaining passengers, price hikes likely aren't far behind. Analysts say that while airlines have raised ticket prices since the recession ended, they still have room to grow.

AP