Delta Reports Wider $1.13 Billion Loss

Delta Air Lines Inc., which is operating under bankruptcy court protection, blamed high fuel costs Thursday as it reported a wider third-quarter loss of $1.13 billion and said it is concerned it continues to use borrowed money to fund its red ink.

The nation's third-largest carrier also said its pilots are wrong in their contention that nearly $91 million in concessions they are offering is enough to help the struggling carrier return to profitability and compete with discount rivals.

The quarterly results, announced after the market closed, missed Wall Street expectations and came despite a solid gain in revenue.

Delta's loss for the three months ending Sept. 30 compared to a loss of $651 million for the same period a year ago. The latest loss includes $4 million in dividends paid out to preferred shareholders.

Excluding one-time reorganization and other special items, Delta said it lost $438 million in the July-September period.

Analysts surveyed by Thomson Financial were expecting a loss of $412.5 million, or $3 a share, in the third quarter.

Delta's earnings release and accompanying financial tables did not include per share figures. A spokeswoman said the company believed using the per share figures was inappropriate because Delta is in bankruptcy. The existing stock likely will become worthless when the company emerges from Chapter 11.

Revenue in the quarter rose 8.9 percent to $4.22 billion, compared to $3.87 billion recorded in the same period a year ago.

The third-quarter loss brings Delta's red ink to just over $11 billion since January 2001. The airline filed for Chapter 11 protection on Sept. 14 in New York.

"While we are pleased with the level of post-petition financing we were able to obtain, we must stop using borrowed money to fund our losses," said Edward Bastian, Delta's chief financial officer.

Delta's comments about its pilots came a day after the pilots union disclosed in a bankruptcy court filing what it is offering the company in concessions. But Delta wants $325 million in concessions from its 6,000 pilots and is asking the bankruptcy court to reject the pilot contract to allow Delta to impose the cuts unilaterally.

A showdown in U.S. Bankruptcy Court in New York looms, with a hearing set for Nov. 16 to discuss the company's motion to reject the pilot contract.

In court papers filed Wednesday night, the Air Line Pilots Association said the $90.7 million average annual concessions over four years it has offered Delta is sufficient to help the Atlanta-based company meet its stated goal of reducing its pilot costs per available seat mile.

But company spokesman John Kennedy said Thursday that the union's analysis is flawed.

"Therefore, its conclusions are erroneous," Kennedy said.

Kennedy said Delta management is open to negotiating with the union, but he stressed that the targeted cuts the company is seeking are essential.

"Our financial situation is urgent and the $325 million need for concessions from the pilots is real," he said.

The cuts would be on top of $1 billion in annual concessions the pilots agreed to in a five-year deal reached in 2004.

The union said that if Delta rejects the pilot contract, that would give pilots the right to strike, and the union warned a walkout would devastate Delta.

Kennedy declined to speculate on the possibility of a strike.

A union spokesman did not immediately return a call Thursday seeking a response to Delta's comments.

Delta has said it believes it will return to profitability two years from now if, among other things, it can get the pilot concessions it is seeking and jet fuel doesn't get more costly.

At a court hearing Thursday, bankruptcy judge Prudence Carter Beatty allowed Delta to abandon leases on nine Boeing 737s and sell a dozen Boeing 767s. The nine 737s were leased to Delta by Pembroke Capital Aircraft (Shannon) Ltd., which leases two of those planes from C.I.T. Leasing Corp.

So far, Delta has gotten permission to reject leases of about 50 aircraft, bringing it closer to its goal of eliminating 80 planes from its fleet by 2006 and reducing domestic flights by 15-20 percent.

The carrier has said it plans to increase international flights to make more profits. At Thursday's hearing, Beatty questioned if that plan will work, and furthermore, if putting resources into more international flights will "sit well" with workers staring down pay cuts.

Still, Beatty suggested that Delta's pilots are overcompensated, saying, "What's really weird is that anyone agreed to pay them that much money to begin with."

In its earnings release, Delta said it ended the quarter with only $1.4 billion in unrestricted cash.

For the first nine months of the year, Delta said it lost $2.60 billion, compared to a loss of $3.01 billion for the same period a year ago. The latest nine-month loss includes $15 million in dividends paid out to preferred shareholders. Nine-month revenue was $12.05 billion, compared to $11.36 billion recorded a year ago.

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AP Business Writer Madlen Read contributed to this report from New York.


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