Delta sees massive billion dollar loss for December quarter

Wrong-way bets on fuel hedges and costs associated with the merger has seen Delta report a massive US$1.4 billion loss for the last quarter of 2008, sending its shares down by almost a fifth.

Excluding costs associated with the merger, Delta would have reported a US$340 million net loss for the October to December period, from this figures excluding the costs of fuel hedges Delta would have reported a US$167 million net profit.

But the massive loss in a three month period sent investors on a selling spree, which saw Delta Air Lines shares drop 19.5% or US$1.94 to close at US$7.99 on Tuesday.

Delta’s merger with Northwest was completed on the 29th of October and one of the heftier costs associated with the integration was the US$900 million charge related to a 13.4% equity stake in the combined airline paid out to employees, as promised by executives if the merger went ahead.

“[In 2008] we not only faced the severe challenges brought on by over $2 billion in increased fuel costs and the onset of a global recession, but also closed our merger with Northwest and began a smooth integration process,” said Richard Anderson, Delta CEO.

“Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies.”

Still, Delta points out that its revenues rose by 43% to US$6.7 billion in the fourth quarter, compared to US$4.7 billion in 2007.

Additionally, Delta adds that it may consider cutting more capacity in 2009 if warranted.  This would be on top of the already planned removal of 40-50 planes from its fleet, about 6-8% of its capacity.