Delta reports $8.9 billion net loss for 2008

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Delta Air Lines today reported financial results for the quarter and year ended Dec. 31, 2008.

Delta’s 2008 net loss was $503 million, or $1.08 per diluted share. When all charges are added Delta reported a net loss for 2008 of $8.9 billion, or $19.08 per diluted share.

Total revenues for the 4th quarter ending December 31, 2008, stood at $7.768 billion. $6.657 billion from passengers, $285 million from cargo, and $826 million from other sources.

A sectoral break-up of passenger revenue :

Key points for the 4th quarter include:

• Delta’s net loss for the December 2008 quarter was $340 million, or $0.50 per diluted share, excluding special items described below, and the impact of out-of-period fuel hedges. Results include $0.12 per diluted share from the negative non-cash impact of purchase accounting.
• Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices.
• Delta’s reported net loss for the December 2008 quarter was $1.4 billion, including an over $900 million charge related to broad-based employee equity awards, and a $91 million loss on out-of-period fuel hedges.
• Delta completed its merger with Northwest on Oct. 29, 2008, creating the world’s largest airline.
• As of December 31, 2008, Delta had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties.

Sectoral comparison of revenues 4th quarter 2007 vs. 2008.

Comparing 4th Quarter 2007 vs. 2008 combined revenues of Northwest and Delta, key points include

• Passenger revenue is down 1% to $6.657 billion due to a capacity decrease of 4%;
• Cargo revenue is down a whopping 24%, to $285 million, primarily due to reductions of Northwest freighter capacity;
• Other revenue is up 17%, to $826 million, thanks to the increases in baggage fees;
• Passenger performance measured in Revenue Passenger Miles or RPKs is down 2.7%;
• Capacity measured in Available Seat Miles or ASKs is down 3.8%;
• Passenger load factor is up 0.8% to 80.6%.

Year on Year, 2008 vs. 2007, Delta reports some improved performance.

• Passenger performance measured in Revenue Passenger Miles or RPKs is up 1.1%;
• Capacity measured in Available Seat Miles or ASKs is up 0.4%;
• Passenger load factor is up 0.4% to 82.4%.

Merger with Northwest
Delta completed its merger with Northwest during the fourth quarter, creating the world’s largest airline, and expects the merger to generate $500 million in synergies in 2009 and $2 billion in annual run-rate synergies by 2012.

Key points include:

• Delta placed its code on over 90% of Northwest routes, creating thousands of additional connecting opportunities for its customers;
• Delta extended its exclusive co-brand credit card partnership with American Express through 2015, which provided the company over $1 billion in immediate liquidity and is expected to provide an additional $1 billion in contract enhancements over the next two years;
• Delta and Northwest pilots, represented by the Air Line Pilots Association, achieved a single seniority list for the combined group. More than 25 percent of Delta’s total workforce has now resolved seniority integration, including pilots, flight dispatchers, meteorologists, aircraft maintenance technicians and other TechOps employees;
• The National Mediation Board ruled that Delta and Northwest now constitute a single transportation system for representation purposes under the Railway Labor Act. This is an important milestone toward resolving representation issues, which will allow alignment of pay, benefits and work rules for all employees of the new Delta;
• Elite members of both airlines’ loyalty programs gained immediate complimentary upgrade reciprocity;
• Delta completed the re-branding of approximately 50 of the airports in which Northwest operates and began a program to paint all Northwest mainline aircraft in the Delta livery by the end of 2010.

2008 Highlights
In addition to completing its merger with Northwest Airlines, other key points in 2008 include:

• Investing throughout the year in its employees through almost $500 million in pension and other retirement program contributions for Delta and Northwest employees, $56 million in combined Shared Reward and Incentive Program payments, pay raises and merger-related equity awards issued in 2008;
• Investing in new technology and process re-engineering, resulting in a reduction of mishandled bags at Delta and Northwest by 20% and 30%, respectively, year-over-year in the December quarter;
• Launching its joint venture with Air France, further strengthening the SkyTeam alliance and filling a key position in Delta’s portfolio by connecting its international gateways in Atlanta and New York to one of the world’s premier business airports at London-Heathrow;
• Receiving antitrust immunity for six-way alliance activities in trans-Atlantic markets for SkyTeam members Air France, Alitalia, CSA Czech Airlines, Delta, KLM Royal Dutch Airlines and Northwest Airlines, enabling the carriers to offer customers more choice in flight schedules, travel times, services and fares;
• Implementing an expanded marketing alliance with Alaska Air Group, allowing the companies to offer customers more departures along the West Coast than any U.S. airline and the enhanced ability to connect passengers to Delta’s growing global route system;
• Continuing its international expansion to unique destinations and announcing new service from Los Angeles to Sydney, Australia to begin in July 2009, making Delta the only U.S. carrier to serve six continents;
• Taking delivery of two new B777-LR aircraft to support Delta’s international expansion and five B737-700 aircraft that allow the addition of service into airports requiring high-performance aircraft such as in Tegucigalpa, Honduras;
• Providing SkyMiles members with more ways to redeem their miles by initiating a “Pay with Miles” program in partnership with American Express, expanding access to Medallion® Marketplace, growing the SkyMiles online auction program, and enhancing the Award Travel search calendar on delta.com;
• Announcing plans to add new flat bed seats on Boeing 767-400 aircraft to offer customers the comfort of a 180-degree full flat bed on every Delta flight between the United States and London’s Heathrow Airport by the summer of 2009;
• Joining with Aircell® to announce that Delta customers traveling throughout the continental United States will experience the convenience of broadband Wi-Fi on board Delta’s domestic fleet of more than 330 mainline aircraft by the summer of 2009;
• Earning the prestigious 2008 Green Cross for Safety Medal from The National Safety Council, which recognizes organizations and their leaders for outstanding achievements in safety and health, community service and responsible citizenship.

2009 Guidance
2009 is going to continue to heap misery on the airline. System capacity is going to further decrease by 6% to 8% with domestic capacity cuts (10% to 12%) exceeding international services (3% to 5%). Passenger revenue is expected to further decline by 4%.

Read the full release of results here.