Delta Reports Operating Profit

With "exit bankruptcy" written on the next page of its day planner, Delta Air Lines reported its fourth straight quarter of operating profits for the first three months of 2007.

But as has been typical during its nearly 19-month trip through Chapter 11 proceedings, the Atlanta carrier's latest financial snapshot was clouded by bankruptcy-related charges.

Delta said it had a net loss of $130 million during the first three months of the year. But it also had a $155 million operating profit, which excludes interest on debt, one-time charges and some bankruptcy-related items. While less complete, the operating figure is considered a stronger measure of daily financial performance.

Delta reported $124 million in noncash charges and one-time items during the first quarter, down sharply from $1.7 billion in such items in the 2006 quarter. Without the charges, Delta said its net loss was $6 million during the first quarter.

Delta executives said the airline is primed to take off post-bankruptcy, as earlier cost-cutting moves and route changes yield profits.

"We're very proud of what we've accomplished," said Delta Chief Financial Officer Ed Bastian in a conference call. "We expect to reclaim our place" in the industry, he said.

Delta expects to emerge from Chapter 11 on April 30. A confirmation hearing on its reorganization plan is scheduled for Wednesday in the federal bankruptcy court in New York. Earlier this month, Delta said more than 95 percent of creditors' votes supported the plan.

Delta projected that its operating profit margin will surge to about 12 percent in the second quarter, higher than such margins at Home Depot or Wal-Mart.

Delta's operating margin was 3.7 percent in first quarter --- still a vast improvement over its year-earlier figure of negative 13 percent.

Bill Mann, a senior analyst with the Motley Fool, said Delta's bankruptcy reorganization has been "miraculous," noting that the carrier was able to persuade creditors to go along with its plans when it had few obvious bargaining chips.

"I think they've done a spectacular job in terms of restructuring," he said. Still, he's leery of Delta's optimism. Most airlines have been riding high on rising fares over the past year, but other carriers have been warning recently of slower bookings, particularly in domestic markets.

"I just don't know how much better it can get for airlines right now," he said.

On the other hand, Delta's route and revenue management executive, Glen Hauenstein, said bookings are still strong domestically and "accelerating" overseas. "We feel like we're living in a parallel universe," he said.

Delta said its bottom line got a boost from stronger fares and its reorganization efforts, including a wholesale shift of aircraft to overseas routes that has jumped its international revenue to more than 30 percent of the total, from about 20 percent a few years ago.

Delta's first-quarter revenue was $4.1 billion, 11 percent higher than a year earlier.

The carrier said international unit revenue, or revenue per seat per mile flown, rose more than 5 percent compared to a year earlier as it boosted capacity in Latin American and trans-Atlantic markets by 32 percent and 22 percent, respectively. Delta said domestic unit revenue rose 6.3 percent, as it cut capacity more than 5 percent.

Delta said it ended the quarter with $4.0 billion in cash, of which $2.9 billion was unrestricted, a slight increase over the previous report.

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