DAL posts $137 mil profit (sorta)

wheelsup

Well-Known Member
Delta swings to $1B loss, beats Wall Street view


ATLANTA (AP) - Delta Air Lines Inc. said Wednesday it swung to a hefty loss in the second quarter despite a strong increase in sales, pushing its red ink to more than $7 billion since the start of the year.


But the carrier's shares soared over 12 percent as the results, hit by unprecedented fuel costs and a decline in the company's market value, still beat Wall Street estimates when one-time items are excluded.

<snip>

Excluding one-time items, Delta earned a profit of $137 million, or 35 cents a share, in the second quarter.

[...source...]
Awesome news!! I can only hope US Airways can do the same.
 

TheWife

New Member
A $1B loss is awesome news? I don't know how losses and profits and shares and stocks work, but that sounds pretty bad to me.
 

skydog

New Member
I love how airlines report this stuff: Well, we would have made money, except for those pesky 'special charges'." BS! At the end of the day, no matter how they count it, they spent more than they took in.

They made 137 million dollar quarterly profit on revenues of 5.5 billion. That's a 2.5% return on investment. And this is welcomed as good news? I once that if your ROI is not at least 3% or better, than you're actually losing money considering inflation.

Monday night I read an article in the aerospace section of the Financial Times. The article talks about all the problems facing the airlines because of "The price of oil..." More BS!
No doubt that oil prices are contributing to the problems, but the main problem is that the airlines have been undervaluing their product for years (decades!) in an effort to fill those last few seats. Well, they've filled those seats, but now they have conditioned the traveling public to think that $150 fares are the norm. Making their product available on Expedia, Travelocity and the like hasn't helped. Now they're stuck not being able to raise fares to match the rising cost of producing the product. But, it's all because of "the price of oil."

Just as an aside, I reading that article at MSP on a layover, waiting to catch my connecting flight. I was flying from PDX to ATW. Know what the ticket price was? $162!

"Price of oil" my a$$!
 

wheelsup

Well-Known Member
I'm pretty sure they had an increase on their cash on hand, which means they took in more than they spent. And 2.5% is GOOD for an airline. Actually anything on the positive side is good these days.
 

tonyw

Well-Known Member
This is why I would never invest in an airline.

Southwest is considered a well managed, well run airline, right?

Their ROE is 8.2 percent. Their net margin is 5.5 percent.

Compare that to, say, GE.

GE is considered to be slumping right now and their ROE is 18.9 percent and their net margin is 12.5 percent.

If that's what a well run, well managed airline will do for me then why the hell would I invest in it when there are so many better options for me?
 

wheelsup

Well-Known Member
I thought it was pretty common knowledge to not invest in airlines. So I'd say you're not alone in your thoughts.
 

wheelsup

Well-Known Member
I would say most people "speculate" in airline stock. Hardly any investing going on, seeing as though their shares get canceled every few years!! :D

But I agree with you, airlines have always had a ridiculously low ROI...and are for all intensive purposes horrible businesses, at least in the US. Unfortunately.
 

SlumTodd_Millionaire

Evil Landlord Capitalist
I love how airlines report this stuff: Well, we would have made money, except for those pesky 'special charges'." BS! At the end of the day, no matter how they count it, they spent more than they took in.
Um, no actually, they didn't. The one time charges were mostly related to "good will" devaluations, which have nothing to do with money coming in or going out. The only money that actually left was $96 million worth of "early out" bonuses for employees that took advantage of that program. The other $1.1 billion was all the loss of "good will" due to rising fuel prices. So, when it's all said and done, Delta had a net cash inflow. This was a very good quarter for DAL under these economic conditions.

But people do it. Even Warren Buffett did it!
The Oracle of Omaha only did it once. He learned his lesson quickly. :) Really, how big of a black hole does USAir have to be to even cause Warren Buffett to lose money? Sad.
 

B767Driver

New Member
The special items are basically tax writeoffs. The balance sheet improved...but accounting procedures (that I don't come close to understanding) allow corporations to improve their tax and shareholder liabilities with charges and writeoffs. It looks bad, but it's a good thing for the corporation.
 

Baronman

Well-Known Member
Sometimes I wonder.....With the amount of money airlines deal with (in the Billions/qtr), does the CEO/CFO/Board get together and decide if they want to show a small profit/loss.

I mean, really...137 million seems like the amount dealt with in a day or two of operations. A bad day or two could erase that and take the ship into the red. It's like they can tweak a couple numbers to get the results as they want them.

Or do SEC requirements state that independent accounting firms do these audits for them? Either way I think management can easily skew the numbers to achieve an economic "image" that they desire.

Note- I'm not really questioning SouthernJets, this applies to all public companies.
 

sschlesinger

New Member
Just for curiosity sake what is the per hour operating cost for a 737 (average including fuel labor and maitnance.)? I only ask this cause at 150 per seat, one would assume the operating cost far exceeds the cost of all paying passengers.
 

SlumTodd_Millionaire

Evil Landlord Capitalist
Yes, they can "tweak" the numbers by deciding which quarters to show one-time charges and credits, and they can manipulate amortization schedules, but in the end, it all balances out. For instance, in this case, rather than spreading out their good-will depreciation over a longer timetable, DAL decided to take one big massive charge. If they had wanted to show losses every quarter for the next year, they could have spread it out and only taken a $250 million charge per quarter. In the end, they still take the $1 billion accounting hit, but they can manipulate when it appears on the books (within accounting rules, of course).
 

B767Driver

New Member
Just for curiosity sake what is the per hour operating cost for a 737 (average including fuel labor and maitnance.)? I only ask this cause at 150 per seat, one would assume the operating cost far exceeds the cost of all paying passengers.
For a 737 you could "WAG" it by looking at the CASM, which is roughly 9 cents. Multiply by 150 seats and multiply again by the speed per hour of roughly 500 mph. That would be about $6800 per hour or $43 per hour per seat.

Do the same for an RJ at about 14 cents per seat mile with 50 seats. $3500 per hour or $70 per hour per seat.

Compare it to a car at 20 mpg. To operate the car for an hour at 60 mph it would cost 3 gallons or $12.

To compare the car to the airliner...it would take 8 hours to cover the same 500 mile trip the airliner does in an hour. So 8 hours multiplied by $12 per hour...would cost the car driver $96 for the same trip.

So...the next time someone tells you the airliner is an inefficient way to travel...you can tell them differently.
 

Hernandezcfi

Well-Known Member
To compare the car to the airliner...it would take 8 hours to cover the same 500 mile trip the airliner does in an hour. So 8 hours multiplied by $12 per hour...would cost the car driver $96 for the same trip.

So...the next time someone tells you the airliner is an inefficient way to travel...you can tell them differently.

...but if your time is worth say...$30 per hour, then tack an extra $210 to the cost of the road trip.
 

tonyw

Well-Known Member
Or do SEC requirements state that independent accounting firms do these audits for them? Either way I think management can easily skew the numbers to achieve an economic "image" that they desire.

Note- I'm not really questioning SouthernJets, this applies to all public companies.
Question to an accountant: What do two and two make?

Answer from an accountant: What do you want it to make?

Yes, that's a joke. But there is some truth to it.
 

kellwolf

Piece of Trash
I want a "good will devaluement" tax break on my house thanks to the slumping real estate market. Then I won't have to pay taxes next year. Oh wait, it doesn't work that way for non-corporations. If I buy a house and it devalues, it's tough luck for me. I can't take an "impairment of goodwill" tax credit.....
 

NJA_Capt

Well-Known Member
Even Warren Buffett did it!
He also said it was his biggest mistake, and wouldn't invest in another airline.

"...my analysis of USAir's business was both superficial and wrong.
I was so beguiled by the company's long history of profitable
operations, and by the protection that ownership of a senior security
seemingly offered me, that I overlooked the crucial point: USAir's
revenues would increasingly feel the effects of an unregulated, fiercely-competitive market whereas its cost structure was a holdover from the days when regulation protected profits
. These costs, if left unchecked, portended disaster"


"a friend once asked me: "If you're so rich, why aren't you smart?" After reviewing my sorry performance with USAir, you may conclude he had a point."

http://www.berkshirehathaway.com/letters/1996.html
 
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