Delta swings to profit in fourth quarter

Delta Air Lines posted a fourth-quarter profit and said it expects 2011 earnings to top last year, despite rising fuel costs, reported the Wall Street Journal.

The second-largest US airline by revenue has become more cautious about its outlook, but said a combination of capacity discipline, higher industry fares and rising ancillary revenue would allow it to weather the latest jump in fuel prices.

"We will make responsible decisions around capacity," said chief executive Richard Anderson after the company reported its first fourth-quarter profit in a decade, though the near-break-even result trailed analysts' expectations.

Atlanta-based Delta has already cut its domestic aircraft fleet by around 100 planes to 700 over the past 18 months. It plans to do the same again and may make more cuts if fuel prices continue to rise.

The airline's first quarter will be weighed down by an expected US$30 million charge for the latest round of winter storms to hit the East Coast, but it is fuel that remains the most significant headwind for the industry.

President Ed Bastian said the airline needed to improve on "structural actions" taken so far to counter fuel costs, which will leave its forecast first-quarter margin at one to three percent. Delta is targeting a long-term margin of 10 to 12 percent.

Anderson has been committed to turning Delta into a more "normal" company, free from the profitability cycles that have dogged the airline industry, and pledged to keep capital expenditure in check alongside capacity. After big upgrades to its existing aircraft, Delta is looking to replace older planes with an expected order this year for 200 or more that would start arriving from 2013.

He also said Delta would remain aggressive in cutting distribution costs, part of an industry-wide challenge to the existing business model where airlines pay fees to intermediaries to connect with travel agents.

Delta reported a profit of $19 million in the fourth quarter compared to a prior-year loss of $25 million.

Revenue increased 14 percent to $7.79 billion, helped by its frequent-flier programme and other services.

Passenger revenue rose 15 percent, while passenger revenue per available seat mile, considered the best revenue gauge for airlines, grew eight percent, after a prior-year decline of 5.4 percent.
(Source:www.cargonewsasia.com)