Delta to align headcount with reduced capacity

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Published: April 26, 2012

Delta Air Lines 737-800. By Rob Finlayson

Delta Air Lines (DL) reported first-quarter net income of $ 124 million, reversed from a 2011 first-quarter net loss of $ 318 million. The carrier stressed a focus on capacity discipline, and in Wednesday’s earnings conference call, announced it will be aligning its headcount with reduced capacity. It is currently offering a “unique … one-time,” month-long voluntary retirement package to employees—closing April 30—and expects those employees to exit after the summer flying season.

First-quarter revenue rose 9% to $ 8.41 billion on a 2% increase in expenses to $ 8.03 billion, producing operating income of $ 382 million, turned around from a $ 92 million operating loss in the year-ago period. During the quarter, the carrier’s fuel expense, which rose by $ 250 million on a 14% increase in fuel prices, was offset by $ 45 million of fuel hedge gains and reduced consumption.

“This is the best March quarter Delta has generated since 2000,” DL president Ed Bastian said. “So clearly our plan is working.” That plan—increasing revenues, maintaining discipline with costs, capacity and capital—contributed to margin improvement in every region and in every hub across its global network during the quarter, the carrier said.

Consolidated traffic rose 1% to 43.35 billion RPMs while capacity dropped 3% to 54.41 billion ASMs, producing a load factor of 79.7%, up 3.3 points. Yield lifted 9% to 16.67 cents as PRASM jumped 14% to 13.28 cents and CASM rose 6% to 14.76 cents. CASM ex-fuel increased 4% to 9.28 cents.

DL CEO Richard Anderson expects the June quarter and full year to be “not only solidly profitable but also a significant improvement over last year, despite higher fuel prices.” He added, “We like the trajectory we are on so we will stay the course.”

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