Delta reports best 4Q profit in its history

Transportation • Airline earns $854 million in 2011 by cutting capacity, matching fuel price spikes.

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Delta Air Lines on Wednesday posted the most profitable fourth quarter in its 84-year history by boosting fares high enough to cover increasing jet fuel prices.

And if fuel rises further, expect Delta to increase ticket prices further, CEO Richard Anderson said.

"We will continue to pass along higher input costs and ticket prices while at the same time working to manage volatility of fuel expense," Anderson said in a conference call with analysts to discuss the Atlanta-based carrier's latest financial results.

Delta operates its western-most U.S. hub at Salt Lake City International Airport, where it employs more than 3,000 workers, including 600 pilots.

The airline earned $425 million, or 50 cents a share, in the three months ended Dec. 31, beating the consensus estimate of more than a dozen analysts who had expected 38 cents. Delta earned $19 million, or 2 cents per share, a year earlier.

"This [was] Delta's most profitable December quarter in its history," Anderson said.

Anderson isn't banking on lower fuel prices anytime soon. The carrier paid an average of $2.97 per gallon in the October-through-December period. It expects the average to go to $3.16 during the first quarter, which ends March 31.

For passengers, that means fuller airplanes and fewer flight options in coming weeks. Delta plans to trim systemwideseat capacity by 3 percent to 5 percent compared to the same quarter of 2011. Bigger cuts will come from international flights [down 4 percent to 6 percent], while domestic cuts will range between 2 percent and 4 percent.

"We will keep Delta's capacity in equilibrium with demand and fuel price," Anderson said.

The fourth quarter was good news for Delta, which has seen its stock price struggle in the past year. Revenue grew by 8 percent to $8.4 billion from the last quarter of 2010, despite a 3½ decrease in seats and the fuel price rise, which Delta put at 5 percent.

Delta's full-year profit totaled $854 million, up 44 percent than in 2010. Revenue rose 11 percent to $35 billion with 30 fewer airplanes. Delta has now turned two consecutive annual profits, despite $3 billion in higher fuel expenses last year.

"This is the most important factor because fuel cost increases were covered by revenue," Anderson said.

Investors toasted Delta's results by pushing Delta's stock up more than 6 percent to $9.96 a share.

The results also appeared to cheer several analysts. Michael Linenberg, with Deutsche Bank, complimented Anderson and other Delta executives during the call, saying "great quarter, guys."

One question on the minds of analysts was whether Delta is interested in acquiring American Airlines, whose parent company filed for bankruptcy in November. Delta and its smaller rival, US Airways, are reportedly exploring potential deals with American, according to the Reuters news service.

On Wednesday, US Airways confirmed its interest. Anderson, meanwhile, refused to comment.

pbeebe@sltrib.com

Twitter: @saltlakepaul