=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2002/07/18/f= inancial1034EDT0084.DTL ---------------------------------------------------------------------- Thursday, July 18, 2002 (AP) Delta loses $186 million in the quarter; Northwest loses $93 million; South= west has $102 million profit The Associated Press (07-18) 14:19 PDT (AP) -- The nation's third- and fourth-largest airlines, Delta Air Lines and Northwest Airlines, blamed their second quarter losses Thursday on the air travel slump and the need to lure passengers with cheaper fares. But Southwest Airlines, the leading low-cost carrier, remained profitable even as its margins were squeezed under these harsh conditions. The combined $279 million loss by Delta and Northwest comes on the heels of steep losses by their rivals. American and Continental reported losses of $495 million and $139 million, respectively, earlier this week. The nine largest carriers are expected to report a combined quarterly lo= ss of $1.3 billion and with the outlook for the next six months also grim, analysts are predicting losses for the year to reach $5.5 billion. Major carriers lost $2.4 billion during the first three months of 2002. During the second quarter, industrywide passenger traffic fell 10 percen= t, according to UBS Warburg analyst Samuel Buttrick. Because average ticket prices were down sharply, revenue per passenger dropped 17 percent, Buttrick said. ^Delta Air Lines The nation's third largest airline said second quarter losses more than doubled to $186 million, or $1.54 per share, compared with $90 million, or 76 cents a share, in the same period a year ago. Delta's results beat analysts low expectations. Revenue declined 8 percent, to $3.47 billion, from $3.77 billion in the same quarter last year. Excluding $24 million one-time costs related to grounded aircraft and other expenses, Delta lost $162 million, or $1.34 per share. Analysts had expected a loss of $1.39 per share, according to a survey by Thomson Financial/First Call. In a sign of an improving operating environment, Delta said it was profitable during the month of June and had positive cash-flow during the entire April-June period -- the first such quarter since the Sept. 11 terrorist attacks. "Delta's financial performance is recovering slowly as we work through o= ne of the most challenging times in the history of our company and our industry," said Leo F. Mullin, Delta's chairman and chief executive. Mullin said he expected a "turning point" for the company by the end of June, but "that simply has not occurred." Further service reductions will be necessary, the company said. Like its major rivals, Delta's recovery from the decline in air travel after Sept. 11 has been hampered by reduced spending by business travelers and an inability to make price increases stick for leisure travelers. Atlanta-based Delta has lost $583 million, or $4.79 per share, through t= he first half of the year, compared to a loss of $223 million, or $1.87 a share, in the first six months of 2001. Half-year revenue was $6.57 billion, down from $7.61 billion in the first half of last year. Delta ended the quarter with $2.8 billion in cash and other reserves. Shares of Delta rose 10 cents to $16.55 Thursday on the New York Stock Exchange. ^Northwest Airlines The fourth-largest carrier said second-quarter losses grew by 69 percent to $93 million, or $1.08 a share, compared with $55 million, or 65 cents a share, during the same period in 2001. Northwest's results exceeded Wall Street's dour forecast of a loss of $1.21 per share. Revenue was down 11 percent to $2.41 billion from $2.72 billion a year earlier. Northwest said it was hurt by reduced spending by business travelers and lower fares for all passengers. "Though it is difficult to predict when Northwest will announce a quarterly profit, we remain convinced that Northwest will be among the first major carriers to do so," said Richard Anderson, chief executive officer. For the first six months of the year, Northwest lost $264 million, or $3.09 a share, compared with a loss of $226 million, or $2.70 a share, in the first half of 2001. Year-to-date revenues were $3.87 billion, down 15 percent from $4.54 billion a year ago. Passenger traffic for the first six months of the year was down 9.3 percent. Northwest cut its flight capacity by about 20 percent last September and has gradually restored flights. However, Northwest doesn't plan to be back to its 2000-level capacity for at least another year. One factor helping Northwest and other carriers is a decline in jet fuel costs, the second largest expense after labor. Northwest shares rose 42 cents to $9.88 on the Nasdaq Stock Market. ^Southwest Airlines Second quarter earnings at the nation's seventh-largest airline tumbled = 42 percent to $102 million, or 13 cents per share, compared with $176 million, or 22 cents per share, a year earlier. The company missed Wall Street's expectations. Revenue in the period ending June 30 fell 5 percent to $1.47 billion from $1.55 billion a year ago. Excluding a gain for a reduction in estimated refunds and exchanges, the airline said it would have earned $85 million, or 10 cents per share. Analysts surveyed by Thomson Financial/First Call had estimated the company would earn 11 cents per share. Chief executive James F. Parker said Southwest would likely fall short of Wall Street's expectations during the third quarter, too. Shares of Southwest fell 65 cents to $13.28 on the NYSE. Chief financial officer Gary Kelly said July and August bookings show no evidence of an increase in travel. September is usually a slower period for airlines, Kelly said, adding that an industry recovery might not occur until spring. Not immune from the rest of the industry's ills, Southwest, too, had to offer lower fares to attract passengers. The number of customers paying full fare declined to 32 percent from 39 percent a year ago, the company said. Its planes were also slightly less full than last year -- 69.9 percent occupied instead of 71.7 percent. A critical issue for Southwest going forward is its ability to control costs. Three weeks ago, Southwest's union mechanics asked federal mediators to help settle a stalemate in contract talks, and the airline also is bargaining with pilots and flight attendants. "We know and our employees know they need to be well compensated, fairly compensated ... but we've got to be true to what makes Southwest Airlines successful," Kelly said. He said the low-cost carrier must "manage our wage rate increases in a way that we can afford it." Southwest said it ended the June 30 period with $2.1 billion in cash. In the first six months of the year, Southwest earned $124 million, or 15 cents per share, down 58 percent from $297 million, or 37 cents per share, a year earlier. Revenue fell a more modest 8.5 percent, to $2.73 billion from $2.98 billion. On the Net: www.delta.com www.nwa.com www.southwest.com =20 ---------------------------------------------------------------------- Copyright 2002 AP