Delta posts $6.4 billion Q1 loss

Record high fuel costs forced Delta Air Lines Inc. into the red in the first quarter.

The Atlanta-based airline had a net loss of $6.4 billion on $4.8 billion in revenue, compared with a net loss of $130 million on $4.2 billion in revenue in the first quarter of 2007. Loss per share was $16.15, compared with break-even earnings in the first quarter last year.

The results for the first quarter of 2008 include a $6.1 billion non-cash goodwill impairment charge from the decline in Delta's market capitalization due to sustained record fuel prices and a $16 million charge for severance for voluntary workforce reduction programs.

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Delta (NYSE: DAL) spent $1.4 billion on fuel in the first quarter, up 50 percent. The airline hedged 27 percent of its fuel consumption for an average fuel price of $2.85 a gallon. Delta realized $46 million in gains on fuel hedge contracts settled during the quarter.

On March 18, Delta announced a restructured 2008 business plan to focus on preserving liquidity in light of the significant increase in crude oil prices. The airline reevaluated its capacity, targeting reductions in or cancellations of unprofitable routes, and has already implemented schedule changes to bring down domestic flying. Delta now expects system capacity for the second half of 2008 to be down up to 2 percent with domestic capacity down 9 percent to 11 percent.

Due to the capacity reduction, Delta is removing 15 to 20 mainline and 60 to 70 regional jet aircraft from its operations by the end of 2008.

"We have moved quickly to mitigate the short-term impact of higher fuel prices by further reducing domestic capacity and taking a disciplined approach to costs and cash flow," said Edward Bastian, Delta president and chief financial officer. "These actions have offset more than 50 percent of the fuel price impact. However, we clearly need to do more. Merging with Northwest will generate over $1 billion in annual synergies, providing a more durable financial foundation for the future and giving Delta a stronger platform for profitable, long-term growth.''

On April 15, Delta reported a$17.7 billion dealto merge with Northwest Airlines, creating the world's biggest airline.