NEW YORK, Oct. 20 (UPI) -- Delta Air Lines Inc., the nation's third-largest airline by miles flown and Northwest Airlines Corp. posted third-quarter losses, knocked down by surging fuel prices.
Delta in Atlanta reported a sharply wider third-quarter loss, primarily because of high fuel prices and weak airfares. Delta also said it needs "substantial" cost cuts in order to turn around its deteriorating situation.
Northwest Airlines in Eagan, Minn., swung to a third-quarter loss, hurt by higher fuel prices.
Delta posted a net loss of $646 million, or $5.16 a share, compared with a loss of $164 million, or $1.36 a share, a year earlier.
Last week the company predicted a third-quarter loss in a range of $625 to $675 million, or $4.99 to $5.39 a share.
Results for the latest quarter include a $40 million charge related to the sale of eight older jets, and a $14 million non-cash charge associated with to lump-sum payouts to retiring pilots.
Revenue at Delta rose 5.9 percent to $3.87 billion from $3.66 billion, as the airline filled nearly 77.7 percent of its seats, up from 76.6 percent last year.
But Delta said its yield, or the revenue collected from each passenger for each mile flown, fell 4.9 percent.
Four major hurricanes affected Delta's operations in the Southeast, resulting in an estimated $50 million of lost revenue.
Operating expenses for the quarter increased 14.9 percent, driven primarily by a jump of $304 million, or 63.1 percent in fuel costs. For the full year, the carrier expects its fuel costs to exceed prior-year levels by $950 million.
Delta ended the quarter with $1.77 billion in cash, of which $1.45 billion was unrestricted, below the $1.5 billion in cash the company's internal calculations had established as the point where a Chapter 11 filing might become necessary.
Delta has been negotiating with its pilots union for concessions, and is also scrambling to restructure its massive debt.
In September, the air carrier announced plans to cut up to 7,000 jobs, reduce management costs by 15 percent and trim pay and benefits as part of a plan that Delta hopes will save more than $5 billion annually by 2006.
The moves were meant to avoid bankruptcy, Delta said, blaming a rapid deterioration of its financial condition on low yields, high fuel prices and labor costs, and a high debt burden.
"Last month we outlined the key elements of Delta's transformation plan, which targets $1 billion in annual pilot-cost savings, as well as participation from Delta's other stakeholders," said Delta Chief Executive Gerald Grinstein. "As Delta's financial situation continues to deteriorate, time is of the essence."
Delta noted that even if it succeeds in achieving the benefits from its plan, the company will still have "substantial" liquidity needs in 2005.
In connection with the plan, the airline expects to record "significant" one-time adjustments in the fourth quarter. These adjustments relate to a gain from the elimination of the subsidy it offers for retiree and survivor healthcare coverage and charges from voluntary and involuntary employee-reduction programs.
Delta said it cannot estimate the net impact of the adjustments at this time.
Meanwhile, Northwest Airlines reported a net loss of $38 million, or 54 cents a share, compared with a year-earlier profit of $47 million, or 49 cents a share.
Revenue rose 13 percent to $3.05 billion from $2.69 billion a year earlier.
Experts said most airlines are taking a big hit from surging oil prices.
Northwest saw its operating expenses jump 17 percent to $2.97 billion, mainly because of a 57 percent increase in fuel costs.
The company said unit costs excluding fuel rose 1.1 percent.
"As in recent quarters, our operating performance was negatively impacted by record high fuel cost that continues to drive the dynamics of the airline industry," said Doug Steenland, Northwest's president and chief executive.
"As an example of our efforts to address high fuel prices, on Tuesday we expanded a $10 each-way fuel surcharge to nearly all of our domestic fares," he added.
Northwest said revenue passenger miles increased 4.2 percent to 19.7 million. A revenue passenger mile is one paying passenger flown one mile.
The company's load factor, or percentage of seats filled, was 82.9 percent, up from 81.4 percent a year earlier.
Last week, Northwest reached a tentative contract agreement with pilots and salaried workers, that is expected to cut $300 million from its annual costs. The pilots agreed to $265 million in concessions, and managers at the carrier agreed to $35 million in concessions of their own. Union leaders still must vote on whether to recommend the two-year proposal to pilots. Northwest has been seeking labor concessions worth $950 million a year. The company is currently in contract talks with ground workers and flight dispatchers.
