This article from NYTimes.com has been sent to you by psa188@juno.com. A Smaller Loss Than Expected at Delta Sends Shares Up 21 October 16, 2002 By EDWARD WONG Delta Air Lines reported a deeper loss yesterday, reflecting a summer in which passengers - worried about the shaky economy and inundated with talk of war and terrorism - failed to return to the skies at the rate executives had hoped for. But the loss, excluding unusual items, was better than analysts had expected, and shares of Delta rose $1.59, or 21 percent, to close at $9.09 yesterday. That was the largest single-day percentage gain for Delta in two decades, said Jamie Baker, an analyst at J. P. Morgan. "The fundamentals may not be showing any improvement, but at least the deterioration appears to have halted," Mr. Baker said. "Before anything in life starts getting better, it has to stop getting worse first." Delta, the nation's third-largest carrier, was the first airline to report its third-quarter earnings, and its numbers portend a depressing week for the industry. AMR, the parent of American Airlines, the world's largest carrier, is expected to report its financial results today. Analysts expect its numbers to be bleak, though likely not as bad as those of its biggest rival, United Airlines. UAL, the parent of United, is scheduled to announce its third-quarter results on Friday, and has said it could file for bankruptcy by mid-November. Over all, the industry is expected to lose $7 billion or more this year as companies struggle to keep flying. With special charges and gains factored in, Delta lost $326 million, or $2.67 a share, in the third quarter. Excluding one-time charges and gains, the loss at Delta was $212 million, or $1.75 a share, better than analysts' consensus estimate of a loss of $1.84 a share, according to a survey by Thomson First Call. The one-time unusual items included a $139 million charge from a reduction in market value of its aging MD-11 and Boeing 727 aircraft and spare parts. Delta had revenue of $3.42 billion in the quarter, up slightly from $3.4 billion a year earlier, when the Sept. 11 attacks devastated air traffic. In the third quarter of last year, Delta had a loss of $259 million, or $2.13 a share. Delta's bad quarter was not a surprise, because the company had predicted a big loss in a Securities and Exchange Commission filing on Sept. 27. Executives foretold a gloomy year ahead for airlines during a conference call yesterday morning. "There is no doubt that this has been a demanding quarter for Delta and the entire industry," said M. Michele Burns, the chief financial officer. "We do not see a near-term improvement." Ms. Burns said the fourth-quarter loss would be in line with analysts' expectations. The consensus estimate by Thomson First Call is for a loss of $2.20 a share in the fourth quarter. To cut costs, Delta said it planned to ground all 15 of its MD-11 aircraft and defer deliveries of new Boeing planes in 2003 and 2004. The deferrals - five planes next year and 24 in 2004 - will help reduce $1.3 billion from capital expenditures over that time period, executives said. The elimination of the MD-11's, a McDonnell Douglas line that first went into service in 1992 at Delta, will help simplify the fleet of Delta, a move that many large carriers are also undertaking. The fewer different types of planes in a fleet, the more the airline will save in long-term employee training and maintenance costs. Frederick W. Reid, the chief operating officer, said Delta had been relatively successful in predicting the decline in traffic around this Sept. 11, the anniversary of the attacks. The airline reduced the number of seats and flights throughout the quarter, and its systemwide capacity was down 8.3 percent from the period two years ago. (Comparisons to 2001 would be less relevant, because of the unusually drastic cutbacks in flights after the terrorist attacks.) In the third quarter, Delta also received $22 million from the Air Transportation Stabilization Board, which was set up by the federal government to grant $5 billion in cash assistance to the industry after the attacks. In the last month, the chief executive, Leo F. Mullin, has joined rival airline executives on Capitol Hill to urge the government to give the industry more financial aid. They are pushing for the government to pick up security costs, as well as costs related to terrorism insurance. Late last month, the aviation subcommittee in the House of Representatives proposed a bill that included several very limited provisions to help the carriers, but did not tackle the issues that the executives were most concerned about. The current legislation, if passed, would extend the government's role in helping to provide war-risk insurance and to accept again applications for a $10 billion loan guarantee program if the United States goes to war with Iraq. But the legislation would not end a security tax of $2.50 a flight segment that the government has levied on airline tickets. Executives argue that the tax unnecessarily raises ticket prices at a time when people are already reluctant to fly. Mr. Mullin said he expected Delta to forgo $250 million of revenue this year because of this tax. "I don't think it's done yet, obviously, and we'll continue working on this," he said of the government's proposed aid package. It is questionable whether this bill would even go to a full vote in the House and the Senate, because many members of Congress are preoccupied with sifting through what is generally considered more important legislation dealing with war against Iraq. http://www.nytimes.com/2002/10/16/business/16AIR.html?ex=1035780140&ei=1&en=b761bd338c44e4ae HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company