Delta on the brink after huge losses
Delta Air Lines has warned it cannot survive without lowering its cost structure, after posting a three-month loss of $312m.
The second quarter losses, which were almost a third higher than in the same period last year, came despite a 13 per cent increase in revenues.
The airline suffered from intense competition in the North American market, from AirTran at its Atlanta hub and JetBlue on its Florida routes.
In addition, Delta suffered from an 11 per cent rise in operating expenses during the quarter and fuel costs accounted for 70 per cent of the rise in costs.
In total, the airline’s second quarter losses hit $1.96bn, after including $1.6bn of non-cash charges related to deferred tax benefits.
Delta executive vice president and chief financial officer Michael Palumbo said: “We clearly cannot survive without a lower cost structure.”
The airline has already implemented a strategic review, which includes a new contract for pilots. Delta’s pilots are the highest paid in the industry and the airline is seeking an agreement with its union for substantial pay cuts and productivity increases.
Delta chief executive Gerald Grinstein said: “The results further confirm the need for Delta to transform itself, once again.
“The challenges we face are significant and all of our stakeholders must participate in the solution.”
Delta’s yields on Atlantic routes rose slightly, by nearly one per cent, while yields on its Pacific routes were up 15 per cent.
But the airline painted a gloomy picture for the short-term future, saying it expected yields generally to continue to decline, with continued pressure on fares from other airlines.
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