Delta Predicts 1st Quarter Loss Amid Strike, Business Fears
By Stephen Trimble
13-Mar-2001 4:40 PM U.S. EST
Delta Air Lines expects to post its first quarterly loss in six years later this month, as America's slumping economy has slowed ticket sales and a looming strike threat by pilots is scaring away potential customers.
Roughly 1,400 pilots for Delta's Comair regional jet unit could be on strike as soon as March 26, when negotiators conclude a 30-day cooling-off period. Delta also remains at an impasse with its 9,800 pilots, and both sides expect the National Mediation Board to soon call for a 30-day cooling-off period.
Consumer fears of a possible strike only compounded weaker business traffic caused by America's slipping economy, Delta reported. Plus, the carrier lost an estimated $100 million when it cut back flights by 2.7% after pilots refused to work overtime.
Operating revenues through March might drop $350 million below the airline's previous forecast, according to a Delta filing with the U.S. Securities and Exchange Commission. Another $250 million in projected earnings could evaporate through June, Delta said.
Flight schedules should return to normal during the second quarter, Delta chief executive Leo Mullin said today at the 26th Annual FAA Commercial Aviation Forecast Conference.
But changing the airlines earnings prospects won't be so easy. Since business travel shifts dramatically with the state of the markets, Mullin said, Delta's fortunes are largely tied to a healthier economy.
"We need to get a significant boost in the economy," Mullin told reporters after the speech.
That's not likely to happen soon, said Merrill Lynch aviation analyst Michael Linenberg, who downgraded Delta's stock from "buy" to "accumulate." Delta's financial status could deteriorate even further.
"How low could our estimates go? Several weeks ago, we stated that a 50% reduction in 2001 earnings versus 2000 was a possibility," Linenberg wrote in a notice published today. "With our 2001 forecast for Delta now down 40% from 2000, we are not far off that mark."
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