Delta Air Sees 4Q Profit As Sector Rallies

The head of Delta Air Lines Inc. (DAL) said Wednesday that the European Union should help the region’s carriers compete with fast-growing Middle East rivals. Richard Anderson, Delta’s chairman and chief executive officer, is the first U.S. airline executive to address the competitive threat of carriers such as Emirates, Etihad and Qatar Airways, which are using their geographical position to take market share from established entrants on long haul international routes. European carriers including Deutsche Lufthansa AG (DLAKY, LHA.XE) and Air France-KLM (AFLYY, AF.FR)–a Delta partner in the SkyTeam alliance–have rallied against Middle East rivals, alleging they receive unfair subsidies. Emirates and others deny the charge. Anderson said on a conference call that the European Union should support airlines in the region by providing antitrust immunity for services to Asia. SkyTeam and the other two global alliances–Star and Oneworld–have benefited from immunity to cooperate on transatlantic and transpacific services. “The EU needs to get on with it,” said Anderson. Anderson said immunity to cooperate on fares and scheduling on Europe-Asia services was “a big piece of the puzzle” in securing more synergies from the alliances. Some EU member states have long resisted giving the European Commission–the EU’s executive arm–authority to negotiate aviation treaties with countries in Asia, notably China, fearing their flag carriers could be disadvantaged. British Airways PLC (BAIRY, BAY.LN) has talked of seeking antitrust approval next year for flights with its Oneworld partner, Japan Airlines Corp. (JALSQ).

Delta Air Lines Inc. (DAL) said Wednesday that it expected to make its first fourth-quarter profit in a decade, highlighting the progress that U.S. carriers have made in managing costs and capacity in the wake of high fuel prices. The forecast came as four of the largest U.S. carriers beat expectations with third quarter profits earned during the busy summer travel season and no sign of a post-holiday slowdown. Strong international growth and discipline in adding back domestic capacity drove up U.S. airline stocks, with Delta and Hawaiian Airlines both up more than 10% in morning trade. Delta left its fourth-quarter and 2011 capacity guidance unchanged, and pledged to hold back capital expenditure in a bid to reduce its debt and prepare for any unforeseen downturn in the industry’s fortunes. Richard Anderson, chairman and chief executive, said he would like to improve on Delta’s existing target of reducing debt to $10 billion by 2012. He also said that global industry consolidation was three-quarters complete. A series of mergers on both sides of the Atlantic has helped to limit capacity growth. The second-largest U.S. airline said it sees an operating margin of 6% to 8% in the fourth quarter–one of the year’s two weakest for U.S. carriers–but kept its capacity forecast intact. Some analysts expected this to be ratcheted down after planned additions, which concerned investors when first announced in August. “The strong revenue momentum we saw in the first half of the year continues to build,” said Hank Halter, chief financial officer, in a memo to employees. Revenue per available seat mile–a key industry measure–is up 11% to 12% so far in October. Delta plans to expand by 5% to 7% in the December quarter, led by a 10% to 12% rise in international flying. President Ed Bastian said overseas services led the third-quarter performance. The airline reported a profit of $363 million for the third quarter compared with a year-ago loss of $161 million. Earnings of 43 cents a share compared with a year-earlier loss of 19 cents. Excluding items such as debt reduction and fleet charges, earnings rose to $1.10 from 6 cents as revenue jumped 18% to $8.95 billion. AMR Corp. (AMR), parent of third-ranked American Airlines, reported a profit of $143 million, or 39 cents a share, for the September quarter. This compared with a year-earlier loss of $359 million, or $1.26 a share. Its shares were recently up 8.7% at $7.09. US Airways Group Inc. (LCC) made $240 million, or $1.22 a share, in the quarter. This compared with a year-earlier loss of $80 million, or 60 cents a share; its shares were up 6.4% at $10.73. Hawaiian Airlines Holdings Inc. (HA) led the sector with nearly a 12% rise to $6.74 after beating analysts’ expectations with earnings late Monday.

Source: Dow Jones Newswires;