Delta does not expect to take a hit from fuel hedging in the third quarter

Tag : oil fuel
The Atlanta-based company updated investors on its financialsituation before an analysts' conference in New York at which DeltaPresident and Chief Financial Officer Ed Bastian spoke. Executivesof several other airlines also spoke at the Calyon SecuritiesAirline Conference.
Bastian said Delta expects its third-quarter results to be in therange of break even to a modest loss.
Delta, which plans to acquire Eagan, Minn.-based Northwest AirlinesCorp. in a stock-swap deal expected to be completed by the end ofthe year, projects it will end the fourth quarter with $3.1 billionin liquidity, including a fully drawn $1 billion credit line.
In June, the company forecast it would end the year with $3.2billion in liquidity, including the credit line, which at that timeit had not yet tapped.
Bastian said Delta and Northwest combined are projected to have $6billion in cash by the end of the year. He said cash preservationis a priority and both companies have been looking at newopportunities.
He said Delta does not expect to take a hit from fuel hedging inthe third quarter like what United Airlines forecast Wednesday. Atthe same time, Bastian said that with respect to fuel hedgescurrently in place Delta in the near term will not be able to takeadvantage of the recent significant drop in the market price forfuel.
Bastian said that Delta is projecting passenger revenue peravailable seat mile to be up 9 percent to 10 percent in the thirdquarter.
Fort Worth, Texas-based AMR Corp., parent of American Airlines,said Thursday that including the American Eagle commuter carrier,its companywide increase in so-called unit revenue will rangebetween 9.4 percent and 10.4 percent in the third quarter, comparedto a year ago.
AMR now expects to spend $9.46 billion on fuel for all of 2008,down from a July forecast of $10.2 billion. AMR also said it netted$294 million by selling 27.1 million new shares of stock. Themoney, it said, will go for "general corporate purposes."
AMR said it expects to end the third quarter with about $4.9billion in cash and short-term investments, including $455 millionin restricted cash. The company ended the second quarter with $5.5billion in cash and short-term investments, including $434 millionin restricted cash.
Beverly Goulet, American's vice president of corporate developmentand treasurer, said the recent decline in oil prices has helped thecompany, "but the questions about the steady-state price of fueland the direction of the economy are as yet unanswered."
Northwest said it could make a pretax profit of $60 million to $100million in the third quarter. The profit prediction did not countpotential hedging gains or losses, and the company did not give anearnings-per-share figure.
Northwest Chief Financial Officer Dave Davis said at the airlineconference that new fees for checked baggage brought in $370,000 onAug. 31 alone, and the company expects $150 million to $200 millionper year in new revenue from those fees.
One of United's financial advantages has been that much of itsfleet is debt-free. Kathryn Mikells, the company's chief ofinvestor relations and incoming chief financial officer, said thateven though credit markets are tighter, United still believes itcan borrow against the planes. She said United, a unit ofChicago-based UAL Corp., has more than $3 billion worth of assetsthat it has not borrowed against, most of it aircraft and spareparts.
"We feel pretty good about our ability to raise incrementalliquidity," she said.
Also Thursday, Houston-based Continental Airlines Inc. saidHurricane Ike cost the carrier about $50 million, discount carrierAirTran Airways said new fees it is charging have not caused a bigchange in customer demand, and New York-based JetBlue Airways Corp.said it plans to slow the growth of its fleet of Embraer 190s andis considering launching a premium snack service.
AirTran is a unit of Orlando, Fla.-based AirTran Holdings Inc.