But, As With NWA, Losses May Mask Greater Progress
Big losses for bankrupt airlines seems to be a recurring theme
this week, as on Friday Delta Air Lines reported a staggering loss
of $2.1 billion for the first quarter of 2006. That number -- a
large part of which was due to restructuring costs -- is $1 billion
greater than the loss posted by similarly plagued
Northwest Airlines for the same time period. As
is the case with NWA, however, those losses may mask progress for
the airline.
At least, that's what Delta management is choosing to focus on
-- as the airline also reported that, excluding non-cash
restructuring costs, Delta "only" lost $356 million for the
quarter... still a high number, but much better than the $684
million loss Delta posted for the same timeframe in 2005.
And, perhaps most significantly, that losses also shrank as the
quarter progressed, as restructuring efforts (including staff cuts,
as well as pay cuts for the airline's non-pilot employees) began to
take hold. In fact, the carrier reports it expects to post only a
$6 million loss in March -- again, excluding restructuring costs --
but still far better than the $351 million loss in January and
February under the same conditions.
"Despite these higher fuel costs... our company succeeded in
reducing the first-quarter operating loss by nearly 50 percent
year-over-year -- evidence that Delta's plan is on-track," said
Delta CEO Gerald Grinstein said, quoted by the Atlanta
Journal-Constitution.
The carrier is also banking on a tentative agreement Delta
reached with its pilots in April, after months of contentious talks
that brought the carrier to the brink of a pilot-walkout-induced
shutdown.
Delta says that threat hasn't
completely dissipated... in fact, the carrier said in a court
filing this week that the continued strike threat was costing
"millions of dollars per week in lost sales, as concerned
passengers and shippers booked flights on other airlines."
Should pilots ratify their contract in voting expected to begin
next Wednesday, that concern would lessen... and a temporary
14-percent pilot pay cut Delta implemented in December 2005 -- that
has already had an impact on Delta's books -- would be carried
through the end of the year, further boosting Delta's fortunes.
Rising fares and reduced capacity -- while banes to travelers --
have also helped Delta lessen its losses as fuel prices continue to
hover around $1.86 a gallon. That's higher than the original
projection of $1.74 Delta's turnaround plan called for, which has
translated into roughly $75 million more in fuel expenses than
predicted.