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Bad, bad newsWednesday, June 18, 2008 - 5:01 PM EDT
Delta: Fuel delivers $4 billion hit; more route cuts planned
Business First of Columbus
The soaring price of jet fuel has cost Delta Air Lines Inc. $4 billion this year and the carrier now plans more cuts in domestic routes to balance out the expense gains.
The Atlanta-based airline said in a Securities and Exchange Commission on Wednesday that President Edward Bastian is expected to brief investors on steps the carrier will take to combat the crippling costs of soaring fuel prices and create a sustainable new business model. The plans include further cutting domestic capacity and boosting its international presence in a move to return to profitability.
Skyrocketing fuel prices have had a $4 billion impact on Delta (NYSEAL) with jet fuel prices in the second quarter averaging $3.18. That price is expected to rise to $3.63 in the second half of 2008.
Delta said it will trim its domestic capacity by 13 percent, beyond a 10 percent cut it projected in March. But the airline will boost international capacity by 14 percent. It also will move ahead with plans to remove airliners from its fleet this year. Delta has said it will mothball 15 to 20 big airliners and 60 to 70 regional jets.
Delta is Port Columbus International Airport's third-largest carrier, accounting for about 14 percent of the Central Ohio passenger market through April.
The completion of its merger with Eagan, Minn.-based Northwest Airlines (NYSE:NWA) also should help the airline become a stronger competitor while reducing cost, Delta said.
Delta's restructuring efforts since 2005 have helped the airline improve its revenue per available seat mile to 102 percent of the industry average in April, up from 86 percent three years ago. The company will continue to rely on its international routes to help it rebound, with foreign flight capacity expected to rise 15 percent to 20 percent this year.
The company recorded profit of $314 million on $13.4 billion in revenue last year, but swung to a $6.4 billion first-quarter loss.