Swine flu, economy prompt Delta to trim SLC-Tokyo route

Hauenstein said the lost flight will be restored if Delta sees fears about H1N1 recede "and the Japanese return to traveling."

Despite that and other challenges, Delta narrowed its quarterly losses year-over-year, losing $257 million, or 31 cents per share. A year earlier, the world's largest airline lost $1.04 billion, or $2.64 per share.

Excluding $390 million in fuel hedge losses -- the airline bet jet fuel prices would rise more than they did, but still paid 42 percent less than a year ago -- and expenses related to its merger with Northwest Airlines in October, Delta said it posted a net profit of $191 million.

Revenue jumped to $7 billion from $5.5 billion, reflecting the merger with Northwest.

Analysts surveyed by Thomson Reuters expected a loss of 29 cents per share on revenue of $6.94 billion. Delta shares closed Wednesday at $5.77, down 4.7 percent, or 29 cents.

"They lost money. On that basis, it's not a good quarter. But given what they were able to do within the quarter, I think they would say it was a very good quarter," said Helane Becker, an airline analyst with Jesop & Lamont Securities in New York. She thought Delta would lose 37 cents a share.

"Operating cash flow was very strong, and they paid down debt, and from a balance sheet [perspective] it was pretty good," Becker said.

During the conference call, executives said Delta and other U.S. airlines were hit hard by the global recession and volatile oil prices that made it hard to forecast accurately where fuel prices were headed.

Passenger revenue decreased 25 percent because of the economic downturn. The swine flu virus chopped $125 million to $150 million. Weak ticket prices and a 7 percent cut in seat capacity accounted for the rest of the $2 billion decline.

"This year has been and will remain challenging for the industry as we do not see any meaningful recovery in 2009," Anderson said.

Starting in September, Delta will cut its systemwide capacity by another 10 percent, with the reductions focused most on international routes, which customarily have been big money-makers for the Atlanta-based airline.

"We are pulling 20 percent of the capacity out of the trans-Atlantic [routes] and 12 percent out of the Pacific," said Ed Bastian, president of Delta and CEO of the Northwest subsidiary.

That prompted the decision to trim the Wednesday flight between Salt Lake City International Airport and Tokyo. Delta will continue to operate flights on Mondays, Thursdays, Fridays and Saturdays.

Despite the heavier cuts coming to trans-Atlantic flying, the Salt Lake City-to-Paris won't be touched, Hauenstein said.

"We are going to retain that route through the winter, so we are quite pleased with demand. It is a very good performer for us this summer," he said.

Earlier this year, analysts expected Delta would report a second-quarter profit. But the revenue decline has persisted, and Anderson said the airline is not expected to make money in 2009. Domestic bookings for the third quarter are running 1-2 percentage points behind last year, according to the company.

"Similar to the rest of the industry, Delta is experiencing significant pressure on revenues," Anderson said. "We may face some tough choices."

Anderson didn't say whether that would mean higher fees and fares for passengers, and/or fewer jobs for employees, but he noted that the carrier's responsibility is to "continue to maximize the revenue across our business."

Chief Financial Officer Hank Halter told workers in a memo that given the economic environment, the airline can't guarantee there won't be involuntary furloughs of front-line employees.

Delta, which employs about 3,500 people in Utah, has already cut 11 percent of its total work force in the past year. Delta has offered voluntary programs in the previous rounds of cuts.

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