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Bankruptcy Math: When Is 'Only' Losing $300 Million Considered A Good Thing?

Answer: When You Lost $314 Million One Year Ago

In the slimmest of signs the airline may be at the beginning of its recovery from Chapter 11 bankruptcy, for the first time in recent memory Delta Air Lines reported losing less money in January than during a comparable period one year ago.

"While Delta continued to post significant losses in January, the company is making progress in stabilizing our liquidity and implementing our business plan," Delta's financial chief, Ed Bastian, said in a statement to the Atlanta Journal-Constitution.

In its monthly financial statement released Friday, Delta reported a January loss of $300 million. That's down from the $314 million the carrier lost in January 2005. The airline also ended the month with $2.1 billion in unrestricted cash available, which is up slightly from December 2005.

If you remove $87 million in costs related to bankruptcy -- including the cost of renegotiating aircraft and facilities leases, and attorney fees -- Delta's loss would be a more-substantially-improved $213 million.

Perhaps most encouraging, however, is the success Delta has had recently in "hedging" fuel prices. This tactic -- made famous by Southwest Airlines -- allowed Delta to fix prices for jet fuel at an average of $1.75 per gallon.

That isn't all that great -- the average price for Jet-A in the Southeast region is, you guessed it, $1.75 per gallon -- but should fuel prices increase, Delta will have at least a portion of its fuel supply price-protected -- unlike last year, when high fuel prices hurried Delta's entry into Chapter 11.

Bastian said the airline's renewed ability to enter fuel hedging contracts, which are based on good credit, or cash reserves, "is another indication of the progress we are making in our ongoing efforts to strengthen our financial performance."

By its own estimate, Delta has also been able to reduce its unit costs, excluding fuel, by 5.3 percent compared to January 2005. If you include fuel costs, however, overall costs rose 2.7 percent.

Unit revenue, however was up almost 13 percent compared to a year ago.

FMI: www.delta.com

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