Earnings Preview: Delta Air Lines

Delta Air Lines Inc., the world's biggest airline operator, reports third-quarter results on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The Atlanta-based company is expected to post an adjusted loss for the July-September quarter.

The period includes the traditionally busy summer season, but major airlines have been hit hard this year by weak demand for air travel, especially for business and international travel.

Capacity has been shed, jobs have been cut and other operational changes have been made, including efforts to preserve cash.

In August, Delta said it was planning to cut more management and administrative jobs, but it didn't say how many. CEO Richard Anderson told employees that Delta has seen its revenue stream decline by billions of dollars because of the weak economy and the drop-off in demand for air travel.

Delta said previously that it planned to cut international capacity by 15 percent starting in September.

Last month, Delta said its available cash on hand will continue to fall by the end of the year. It also said in a regulatory filing that its 2010 funding requirement for its defined benefit pension plans, which have been frozen for future accruals, will increase by an estimated $450 million compared to 2009. The increase in required funding is primarily due to the decline in investment markets last year.

On the positive side, Delta said at the time that it expected its year-over-year revenue per available seat mile decline for the third quarter would show a slight improvement from the second-quarter year-over-year change. The airline said it expected the sequential improvement to continue in the fourth quarter.

System capacity is expected to be down 7 percent to 9 percent for 2009 compared to 2008, Delta said.

Delta, meanwhile, remains on track with its integration of Northwest Airlines under its wing and expects to receive a single operating certificate from the FAA by the end of the year.

Delta's hubs include airports serving Atlanta, Salt Lake City and Tokyo. Along with its Northwest subsidiary and Delta Connection carriers it offers service to 355 destinations in 64 countries.

BY THE NUMBERS: Analysts polled by Thomson Reuters, on average, expect Delta to post a loss of 5 cents a share on revenue of $7.61 billion. Analysts' projections generally exclude one-time items. The airline posted a net loss of $50 million, or 13 cents a share, in the third quarter of 2008 on sales of $5.72 billion. Delta's acquisition of Northwest was not completed until the fourth quarter of last year.

ANALYST TAKE: JP Morgan analysts said in an Oct. 9 research note that they continue to believe business travel demand will pick up around year-end. They said their tolerance for risk and appetite for leverage remains high, implying better risk/reward among legacy carriers than discount carriers. They included Delta among a group of carriers they said should form the core of any basket of airline stocks that investors buy.

WHAT'S AHEAD: Delta is considering making a cash infusion of a couple hundred million dollars to aid struggling Japan Airlines Corp. In exchange for that, Delta could get a stake in Japan Airlines, an expanded presence in Japan and coveted access to the closest airport to the Tokyo business center. As of last month, the talks between the two carriers were in their preliminary stage, and it was unclear what form a partnership between Delta and Japan Airlines might take. Japan Airlines also is talking to other carriers.

STOCK PERFORMANCE: Delta shares rose 53 percent during the third quarter. The stock closed at $5.85 on July 1 and ended the quarter Sept. 30 at $8.96.

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On the Net:

Delta Air Lines Inc.: http://www.delta.com