Delta 4q Loss Widens To $2.2 Billion

[Hatu]

ATLANTA (AP) -- Delta Air Lines Inc., which is transforming its business to reduce costs and attract more fliers, blamed high fuel prices, low fares and hefty charges as it reported a $2.2 billion fourth quarter loss that was much steeper than a year ago.

Delta, the nation's third largest carrier, ended the quarter with $1.8 billion in unrestricted cash.

http://biz.yahoo.com/ap/050120/earns_delta_4.html

 

[LaBradford22]

So, DL lost $780 million before special items in 4Q04, and $2.3 billion for the full-year 2004 (again, before special items). Oh by the way, in 2004, DL booked almost $3.0 billion of special items (that'll do a number on the ol' balance sheet).

But hey, DL did slash their fares recently. So they got that going for them. Which is nice.

 

[Bear96]

Not to worry ...

WorldTraveler will be along shortly to explain why this is actually good news.

 

[Bear96]

Oh Worrrrrrrrrulllllllllllld.....

We know you're out there...

If these were UA's numbers you would have been spinning them as negatively as possible within five minutes!

 

[WorldTraveler]

I've been traveling this week and will next. These numbers were certainly expected. Analysts have said, and I agree, that these numbers would be much more problematic if DL's turnaround were not underway. But it is and significant cash savings will start happening in the first six months of 05. DL's guidance is that all of 05 will continue to have big losses. LaBradford is correct in noting that DL booked huge amounts of non-cash special items. I fully expect that DL will begin the spinoff of one or more of the owned Delta connection carriers in the near future in light of the write down of DL conx goodwill.

It appears that all of the dangerously fragile airlines have been able to obtain what is necessary to stay alive for another six months at least.

 

[Bear96]

Well there ya go.

So the numbers were expected and the turnaround is well underway.

And so if I understand you correctly, all is just peachy on the home front and there is absolutely nothing to worry about, despite all those dang statistics and naysayers, right USA320Pil ... er, WorldTraveler?

Phew, what a relief. For a moment there I thought DL might have lost some serious money over the past couple of years or something. I'm glad to know the men behind the curtain have it all under control.

Thanks for clarifying!

(Gee, I don't think even the old mismanaged punching bag called United ever managed to lose $2.2B in one quarter. But, no one can top DL! Keep up the great work!)

 

[FlyUs]

I've been traveling this week and will next. These numbers were certainly expected. Analysts have said, and I agree, that these numbers would be much more problematic if DL's turnaround were not underway. But it is and significant cash savings will start happening in the first six months of 05. DL's guidance is that all of 05 will continue to have big losses. LaBradford is correct in noting that DL booked huge amounts of non-cash special items. I fully expect that DL will begin the spinoff of one or more of the owned Delta connection carriers in the near future in light of the write down of DL conx goodwill.

It appears that all of the dangerously fragile airlines have been able to obtain what is necessary to stay alive for another six months at least.

[post="241144"][/post]​

Now that's funny!! lol

 

[Fly]

Imagine if that had been United!!!!!! World sure can spin. We should rename him World Spinmeister!

 

[WorldTraveler]

I never said I didn't have a bias. However, I believe an abililty to look at the actual financial performance that few on this board seem capable of doing.

I never said DL's situation was peachy. I have said that DL has delivered the most comprehensive plan to date of any of the legacy airlines to turn themselves and potentially the rest of the legacy industry around. So far, AA is the only other carrier that has put forth as much effort or delivered anywhere close to what DL has put forth. I stand by my statement that AA and DL will be two of the survivors in this industry which will certainly involve failures of at least one and probably several major players (possibly through acquisition).

Let's keep a few things in mind. DL has just begun its turnaround plan. For 3 1/2 years, DL kept its head above water and didn't make the cuts other carriers had to make because DL was in a better financial shape before 9/11 and has been able to borrow much more money sense. Granted, DL has now dug a very large hole because of all of that borrowing and how has a balance sheet that is just as bad if not worse than other legacy carriers. However, to be completely objective, you have to consider the turnaround plan DL has put in place relative to the size of the losses DL has reported so far and in relation to what other carriers have done. UA and US both have not succeeded in doing anything creative to change their business or hold back competition but instead have relied on wave after wave of cuts which have been borne to a much higher degree on the backs of employees than have either AA or DL. Nonetheless, I do think UA is doing the right things to turn itself around and can become operationally profitable; the balance sheet issues incl. pension obligations are quite another matter and are by far the biggest obstacles in UA's way. It is obvious that it is not possible for an airline to cut its way out of the difficulties facing the industry. There must be a fundamental change in the business and the winners will be those that can do that.

I also will continue to assert that AA and DL are in a different league than the rest of the industry because of their ownership of at least some of their regional carriers. I believe AA and DL will unlock the financial strength to fundamentally change the industry THIS YEAR. It is obvious that creditors will continue to prop up failing airlines because they do not have another airline with which to place all of those assets. I believe AA and DL will use the money they can obtain by unloading at least part of their regional airline holdings to drive consolidation in the industry; NW also has considerable financial strength which they can use as well. The bottom line is that up to this point, people have been hoping that airlines will just liquidate and go out of business. I think the excess capacity in the legacy industry will be eliminated through consolidation and acquisition rather than liquidation and the financially stronger airlines will lead the effort.

DL still has a long ways to go in its turnaround. Oil is in the mid 40s when DL's plan is based on $40. However, DL has put a credible plan out for its creditors, including GE which will figure as one of the major players that will figure in industry restructuring. If DL can convince its creditors incl GE that it understands the business and can develop a credible plan to operate within it, those creditors will be willing to allow and support (provide finances) DL and other airlines that can make the industry healthy and viable again. The creditors simply cannot continue to support six airlines, none of which is capable of being profitable at present.
At some point, some dramatic and decisive moves have to be made to turn the industry around. I believe those moves will be made this year and I believe DL will be leading the industry in making those changes. The transformation of the industry will take a considerable amount of time. We are only probably about 40% of the way into the transformation process for the legacy industry. We must take the long the view in terms of thinking through the future prospects of the industry. In light of that standard, I feel even more confident AA, DL, and NW will be the survivors and leaders of the industry and the 3 other legacy players will be controlled by AA, DL, and NW.

 

[Fly]

BS!!

ONLY thing Delta did was to EXTEND the overcapacity. Ticket prices need to go UP not DOWN!

All other businesses increase price as the price of running the business goes up, except the airlines.

What Delta did wasn't a good move, for anyone.....especially themselves. How much did they lose??? $5.2 BILLION!!!!!!! whoa. If that's the turnaround plan....watch out!

In an industry where huge losses are common, Delta Air Lines Inc. is now in a class all its own.

 

[mweiss]

All other businesses increase price as the price of running the business goes up, except the airlines.

[post="241296"][/post]​

Not true. It does happen in stable, established commodity industries, but that's because they have already wrung whatever efficiencies they could out of the market. The airline industry is neither a commodity, nor has it been competitive sufficiently long to wring all efficiencies out of it.

Look at what happened to Wal-Mart recently. Their costs rose because of the double-whammy of increased fuel costs and a weakening dollar. They tried to pass on the increased costs to their customers. Their customers started to leave. Now Wal-Mart is eating those extra costs instead.

 

[Whadayano]

Actually as several of the airlines (go listen to Continental's year end conf call) said, Delta is just accelerating what is seen as inevitable: a lower, simpler fare structure, as competitive with the LCC's as legacy costs can make them. Why it makes sense for Delta is that they were already there at their biggest hub thanks to Airtran and in Florida thanks to Jetblue and Independence. The guy who got hit the worst (and notably screamed the most) was NWA. Continental said on the call it will cost them $10-12mm a month. I suspect AMR and UAL are in the same ball park, taking in to account their size in proportion to CAL's size.

 

[Vikedog64]

BS!!

ONLY thing Delta did was to EXTEND the overcapacity. Ticket prices need to go UP not DOWN!

All other businesses increase price as the price of running the business goes up, except the airlines.

What Delta did wasn't a good move, for anyone.....especially themselves. How much did they lose??? $5.2 BILLION!!!!!!! whoa. If that's the turnaround plan....watch out!

In an industry where huge losses are common, Delta Air Lines Inc. is now in a class all its own.

[post="241296"][/post]​

That has been the mantra in the industry..raise ticket prices. Fly, it doesn't work anymore. The changes are here and whatever legacy cannot change with it quickly, will face a grim future.

 

[Fly]

The airlines are flying people for less $$ than it costs to operate.

Regardless of what the people want, eventually costs must come into line with reality. As long as fuel stays high, the hedging programs will expire and new ones will take their place. That is when we will be able to see the price increase of tickets. It should never be cheaper to fly than drive (but it is!!!)

 

[WorldTraveler]

First, DL's 5.2B annual loss all took place before DL touched the nationwide structure. Second, DL never said it is doing what is good for the industry - they are doing what is good for DL. CO, UA, and a few others might be "friendly fire" casualties of the restructuring that DL sees as inevitable. Third, yes DL is adding capacity which is ultimately not good for the industry but if DL believes it is better for them to add capacity than what they lose by increasing industry capacity, they will do what they need to do to turn things around.

I'm sure the $5.2B yardstick will be held out as the "gold standard" for quite some time. Honestly, I have to see a certain amount of grand standing going on by DL execs in reporting losses that big only to turn the business around. Keep in mind, MS. FLY, DL has a business plan which has passed muster with GE and American Express among others. UA has yet to submit a viable plan of reorganization.

and has been pointed out several times, the pricing environment has changed. While you, Fly, as an airline employee think that prices need to go up in order to avoid further cutbacks in the industry, the reality is that the legacy model has failed and is no longer viable. DL and AA to a lesser extent have led the industry in revamping the fare structure as part of what must take place in order to turn those two airlines around. If the other 4 airlines don't think that is what needs to take place, they need to come up w/ a plan of their own. Since they pretty well fell into line with the fare changes, I think they recognize what DL did made sense. I don't think DL cares that the cost to the other carriers is hundreds of millions of dollars more than it is for DL - a cost which DL obviously budgeted for.