Delta posts 3Q loss as airlines face turbulence

A steep drop in fuel prices has not given airlines much reason to celebrate because a worsening economy threatens to curb demand for flights heading into next year.

Executives also said Wednesday as Delta Air Lines reported a third-quarter loss and American Airlines' parent posted a small profit that travelers have not seen the last of capacity cuts and fees for services that were once free.

Atlanta-based Delta will scale back international growth plans in the coming months and is prepared to cut more domestic capacity if needed to weather the global financial crisis that has intensified in recent weeks, executives said. American, a unit of Fort Worth, Texas-based AMR Corp., will cut capacity again next year by 6 percent, chief executive Gerard Arpey said. The move could help push fares higher if other airlines go along.

Despite the economic downturn, fees and higher fares for the most part have not abated. Fees, in particular, are not expected to lessen anytime soon. Total fee-based revenue contributes about $1 billion to Delta on an annualized basis.

“I think the industry across the board is moving more to an a la carte pricing strategy and I think that strategy is here to stay,” said Ed Bastian, Delta's president and chief financial officer.

For the July-September quarter, Delta posted a net loss of $50 million, or 13 cents a share, compared with a profit of $220 million, or 56 cents a share, a year earlier. Excluding special items, Delta's net loss for the quarter was $26 million, or 7 cents a share. Analysts surveyed by Thomson Reuters expected the company to break even on an earnings per share basis. Earlier in the week, the expectation was a profit of 2 cents per share. Analysts generally exclude one-time items from their estimates.

Revenue in the quarter rose to $5.72 billion, compared with $5.23 billion in the same quarter last year. Analysts forecast revenue of $5.69 billion, slightly above their estimates earlier in the week.

AMR said it earned $45 million in the quarter, helped by a $432 million gain from the sale of its investment business, American Beacon Advisors. Without that sale and other one-time items, AMR would have lost $360 million, or $1.39 per share. Analysts expected the company to lose $1.40 per share. Its revenue rose to $6.42billion from $5.95 billion a year ago, beating the analysts' forecast of $6.34 billion. A year ago, AMR earned $175 million, or 61 cents per share.

Both Delta and American were dragged down by significantly higher fuel costs in the quarter compared with the same period a year ago.

Delta said it spent $1.95 billion on aircraft fuel and related taxes in the third quarter, 54 percent more than the $1.27 billion it spent a year earlier. AMR said it spent $2.72 billion on aircraft fuel in the third quarter, 56.1 percent more than the $1.74 billion it spent a year earlier.

Delta shares rose 27 cents, or 3.7 percent, to $7.62 in afternoon trading. Shares of AMR rose 23 cents, or 2.6 percent, to $9.02.

AP Business Writer David Koenig contributed to this report from Dallas.