Originally created 04/15/04

Delta reports narrower 1Q loss, misses expectations



ATLANTA -- Delta Air Lines' chief executive stressed the urgent need for pilot wage concessions on Wednesday after the carrier reported a $387 million first-quarter loss, saying that "continued losses of this magnitude are unsustainable."

Highlighting Delta's $20.6 billion debt load during a conference call with analysts, CEO Gerald Grinstein added that "our balance sheet has been severly damaged, to the point of exahustion."

At the end of March, Delta had $2.18 billion in cash, down from $2.71 billion at the end of December.

Delta is under assault from low-cost carriers such as JetBlue Airways and AirTran Airways, which are expanding rapidly by wooing customers with inexpensive fares. Delta has responded by selling tickets that are just as cheap, and sometimes cheaper, although it cannot fly profitably at these levels.

Grinstein said "dramatic and radical changes" might be needed to return the airline to profitability. He refused to elaborate, saying a review of potential options could last until late summer.

He has said previously the Atlanta-based carrier would fight to avoid bankruptcy.

The company is seeking a 30 percent pay cut from pilots, who are offering only 9 percent and to forego a 4.5 percent raise they are due in May, the pilots union has previously said.

Pilots union spokesman Chris Renkel said he was disappointed by the company's firm stance on wage concessions.

"We have expressed our willingness to negotiate from the very start and have not shut the door on any kind of interim talks," Renkel said. "But their tenacity in sticking to their opening position does not provide a framework for moving forward."

Delta, the nation's third-largest airline, said it lost $3.12 a share for the three months ending March 31. That compares with a loss of $3.81 a share, or $470 million, in the same period a year ago.

Analysts surveyed by Thomson First Call were expecting a loss of $3.02 a share.

Revenue in the January-March quarter was $3.29 billion, a 4.3 percent increase from the $3.15 billion recorded in the same period a year ago.

While Delta reported $12.5 billion in debt in its earnings release, off-balance sheet debts bring the total to $20.6 billion, reflecting a 104 percent debt-to-equity ratio.

Shares of Delta rose 15 cents to $7.85 in early afternoon trading on the New York Stock Exchange. Its shares are still down more than 30 percent since Jan. 1.

Delta has been trying to cut costs for more than a year to try to return the airline to profitability and prevent bankruptcy, although rising fuel costs have worked against it. The company said Wednesday it has no fuel hedges in place - a strategy that has helped some lower-cost rivals blunt the impact of otherwise expensive jet fuel.

Delta has lost more than $3 billion and laid off 16,000 employees since the 2001 terrorist attacks. Delta had 69,900 employees at the end of the first quarter.

Delta has also been trying to improve customer service.

A study released this month by professors at the University of Nebraska and Wichita State University ranked Delta 12th out of 14 airlines in terms of quality. The rankings were based in part on Transportation Department statistics on on-time performance and the number of customer complaints in 2003.

Industry observers and some customers say the carrier does not have a clear direction and should focus more on its passengers to better compete with low-cost carriers.

In recent months, Delta has taken several steps to try and improve the airline's bottom line. It started a food-for-sale program on some flights and launched a redesign of its uniforms for flight attendants, airport agents and other workers.

On Wednesday, Grinstein said he has no immediate plans to replace Delta president Fred Reid, who was hired in March by Virgin USA to lead the formation of a new budget carrier in the United States. Grinstein said he would discuss what to do with Reid's position with board members following next week's annual meeting and then issue an announcement about his plans within 10 days.

On the Net:

Delta Air Lines: http://www.delta.com



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