Delta Air Lines reports $19 million Q4 profit

By Joshua Freed, AP Airlines Writer

MINNEAPOLIS — Delta Air Lines reported a fourth-quarter profit of $19 million on Tuesday. The results would have been better except for the impact of the snow storms that battered the East Coast late in December.
Analysts had expected a bigger profit, and Delta shares fell 58 cents, or 4.6%, to $12.17 in morning trading. Shares of other airlines were lower as well.

Delta earned 2 cents per share for the fourth quarter. Not counting special items it would have earned 19 cents per share. Analysts surveyed by FactSet expected 27 cents per share. A year earlier it lost $25 million, or 3 cents per share. Delta said many analysts didn't include the impact of the late-December storms.

Earlier this month, Delta said the snow storms would cut its fourth-quarter profit by $45 million after it canceled some 4,000 flights.

Revenue rose 14% to $7.79 billion, more than analysts expected.

During 2010, airlines including Delta, benefited as passengers — especially business travelers — returned to flying as the economy improved. Delta's revenue for each passenger flown one mile rose 8% during the fourth quarter. Delta's operating costs for each seat flown one mile rose by 2%. They would have fallen 2% if not for fuel and special items. Its fuel bill alone rose 13% to $1.93 billion for the quarter.

Delta said its capacity — the number of seats times the number of miles flown — would rise 5% to 7% during the first quarter, including flights on feeder carriers. Much of that will be on international routes. A spokeswoman said the increase was consistent with previously announced plans to increase capacity by 1% to 3% for all of 2011. Delta will be keeping an eye on fuel prices and could change its 2011 capacity plans if needed, CEO Richard Anderson said on a conference call.

Investors have been nervous that airlines will make more seats available than traveler demand can support. The thinking is that passengers will pay more if seats are in short supply.

Rising fuel costs are shaping up as the big issue for airlines in 2011. Delta's fuel bill could rise by $1 billion this year if the price stays where it is, Chief Financial Officer Hank Halter wrote in a memo to Delta workers on Tuesday. Recent fare increases plus revenue growth from add-on fees and services will help cover higher fuel bills, he wrote.

Atlanta-based Delta said it has hedged 49% of its first-quarter fuel consumption. For the fourth quarter, it hedged 58%, for an average fuel price of $2.47 per gallon. That was about 30 cents per gallon higher than the same period a year earlier.

For the full year, Delta earned $593 million, or 70 cents per share. That compared with a 2009 loss of $1.24 billion, or $1.50 per share. Revenue for the year rose 13% to $31.76 billion.

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