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Delta warns on 4Q
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December 21, 2001: 2:11 p.m. ET
No. 3 airline sees operating loss of about $500M; charges could hit $700M.
By Staff Writer Chris Isidore
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NEW YORK (CNN/Money) - Delta Air Lines warned in a Securities and Exchange filing Friday that it will post a larger-than-expected fourth-quarter loss.
The nation's No. 3 airline said it sees a loss excluding unusual items in the range of $500 million. That comes to about $4.06 a share, above the $3.64 a share loss forecast of analysts surveyed by earnings tracker First Call. Delta earned 60 cents in the year-ago quarter.
The results exclude about $370 million in federal assistance the Atlanta-based carrier received as part of the federal bailout of the industry, but it includes special charges of $550 million to $700 million for severance, write-off of grounded jets, closing of facilities and other moves the airline made in the wake of the Sept. 11 terrorist attack.
The company's filing also warned that a Dec. 18 downgrade of its debt by credit rating agency Moody's could force it to repurchase some accounts receivables which had been purchased by an unidentified third party. It said there had been no discussions yet about such repurchase.
All the major airlines have seen both fares and demand for travel fall in the wake of the Sept. 11 terrorist attack. Miles traveled by paying customers on Delta in November were off 20.1 percent from year-earlier levels, and although the airline has cut capacity as a response, the number of seats available is down only 13.6 percent, meaning planes are flying emptier.
Overall domestic fares were off 16.3 percent in November, according to figures released Friday by the Air Transport Association, the industry's trade group.
But despite the bad news, many airline stocks, including Delta, were higher Friday after UBS Warburg analyst Sam Buttrick issued a report that argued most U.S. airline stocks can rise 80 to 200 percent over the next two years.
Buttrick said that industry-wide traffic was off 18 percent in the first half of December, compared to the 20 percent drop in November, and that holiday traffic is apparently going to be off about 14 to 15 percent.
Shares of Delta (DAL: up $1.21 to $29.07, Research, Estimates) were higher in early-afternoon trading immediately following the announcement, although they were off their high of the day.
Delta on Friday also came out on the record against the proposed alliance between competitors American Airlines, a unit of AMR Corp. (AMR: up $0.55 to $22.20, Research, Estimates), and British Airways (BAB: up $1.61 to $28.61, Research, Estimates).
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Delta's filing with the Transportation Department backed the position taken earlier this week by the U.S. Justice Department that the two carriers should have to give up landing slots at London's Heathrow International Airport if they are to gain an exemption from antitrust laws that they're seeking in order to cooperate on issues of pricing, scheduling and marketing. Delta's filing actually asks that the carriers be required to free up four times as many slots as recommended by Justice.
The Justice position is only advisory to the U.S. Transportation Department, which is the lead agency among U.S. regulators on the issue. 
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