Delta Air Lines announced June quarter profit

Delta Air Lines today reported financial results for the June 2011 quarter.  Key points include:

-- Delta's net income for the June 2011 quarter was $366 million, or $0.43 per diluted share, excluding special items(1).  

-- Delta's net income was $198 million, or $0.23 per diluted share, for the June 2011 quarter.

-- Strong top line revenue growth of 12% year over year helped offset more than $1 billion higher fuel expense.

-- Delta generated a revenue premium, with unit revenues up 10% for the quarter.

-- Delta generated $1 billion of operating cash flow and $700 million in free cash flow in the quarter.  The company ended the June 2011 quarter with $5.6 billion in unrestricted liquidity.

“High fuel prices are putting significant pressure on the industry, but the benefits of Delta's strategic actions and the dedication of Delta employees are evident in the solid profit we produced despite more than $1 billion in higher fuel expense,” said Richard Anderson, Delta's chief executive officer.  “Our revenue momentum, coupled with the capacity reductions we are making in September and actions to get our non-fuel costs to 2010 levels, will generate the margins we need to hit our return targets.”  

Adapting the Business for Higher Fuel Prices

Delta is recalibrating its business to succeed in a permanent, high fuel price environment.  The company's actions include:

-- Using fare increases, fuel surcharges and revenue initiatives to recover fuel cost increases through ticket prices;

-- Reducing its December quarter capacity by 4 - 5% year over year, an incremental 1 point reduction from previous guidance, focused in markets where revenues do not cover higher fuel costs.  Domestic capacity will be down 1 - 3% and international capacity will be down 4 - 6%.  In the transatlantic, Delta and its partners, Air France - KLM and Alitalia, established capacity levels as a single entity, leading to a combined reduction in transatlantic capacity of 7 - 9% for the December quarter;

-- Retiring 140 of Delta's least efficient aircraft by the end of 2012, including the entire DC9 and Saab turbo-prop fleets, and 60 50-seat regional jets.  Half of these aircraft will exit the fleet in 2011, which will contribute to the expected $250 million in maintenance savings for the second half of 2011 compared to the first half of the year; and

-- Implementing initiatives to reduce the company's non-fuel unit costs to 2010 levels by the end of 2011, including voluntary exit programs accepted by more than 2,000 employees; consolidating more than 1.2 million square feet of facilities in Atlanta and Minneapolis; and lowering selling and distribution costs by shifting to more efficient distribution channels.

Revenue Environment