Delta Cautious But Not Suicidal (DAL, NWA)
Delta Air Lines (NYSE: DAL) is in an odd spot this morning. The company beat earnings and claims a gain before extraordinary items, yet it still had a wide loss on a net income basis. The carrier posted Q2 earnings of $0.35 EPS excluding non-recurring items, $0.25 better than the First Call’s $0.10 estimate; revenues were $5.5 Billion versus the $5.39 Billion consensus.
Delta sees Q3 operating margin of -1.3% ex-items and sees Fiscal 2008 operating margin of 0% to -2%. Delta also expects to cover approximately $3 Billion of the estimated $4 Billion raw impact of higher fuel input costs in Fiscal 2008 and expects to end 2008 with a liquidity position of about $3.2 Billion.
The company claimed 49% of its fuel consumption was hedged at $3.13 per gallon and said it realized a $313 million gain from its hedges. Here is its fuel hedge position:
Q3 2008 48% $2.94
Q4 2008 46% $3.42
FY 2009 21% $3.48
FY 2010 5% $3.05
Delta said it plans to close its merger with Northwest (NYSE: NWA) by the end of 2008. Shares of Delta are up nearly 5% at $4.90 in pre-market trading since the company is not sounding off the death of itself. This also has Northwest shares up about 2.2% pre-market at $5.51.
Jon C. Ogg
July 16, 2008