Airlines • Federal budget cuts already having an impact on carrier.
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Delta Air Lines eked out a $7 million profit in the first quarter of the year, saying last-minute bookings declined in late March and leisure travel has slowed, while its revenue from travel in the defense sector is down amid federal budget cuts.
The across-the-board cuts known as sequestration, which led the Federal Aviation Administration to reduce air traffic controller staffing this week, are also leading to cancellations of flights on smaller regional planes.
Delta said it canceled about 90 of its regional Delta Connection flights in the Northeast on Monday to avoid long delays, and rebooked those passengers on larger airplanes. The airline said delays in the Northeast were in the 60-minute to 90-minute range, which Delta said it can manage.
"Ultimately the cost is borne in time by the consumer," said CEO Richard Anderson during a conference call Tuesday.
Delta's profit was down from $124 million a year earlier. But the company said excluding unusual items such as accounting adjustments for fuel contracts and aircraft and airport transactions, the fundamentals of its financial and operating performance were the strongest for a first quarter in more than a decade.
For years, airlines such as Delta have lost money in the seasonably slower first quarter. Anderson called the profit "tangible proof that we are successfully changing the global airline business model at Delta."
The company grew its operating revenue by 1 percent, to $8.5 billion, while operating expense climbed 3 percent, to $8.3 billion.
Delta said it expects that as a result of the federal budget cuts, combined with softer demand for leisure travel, its unit revenue in April will decline by 2 percent to 3 percent. On the other hand, it is benefiting from lower fuel costs, allowing it to increase operating margin.
The company continues to struggle with achieving profitability on its recently purchased oil refinery in Pennsylvania. The facility lost $22 million in the first quarter because of supply disruptions and an outage on a gasoline production unit. Delta expects to report a profit for the refinery for the second quarter, but the company now says it's unclear whether the refinery will turn a profit for the full year.
Looking at the second quarter, Delta said it expects its flying to be roughly flat, with international flying flat to down 1 percent and domestic flying to be up 1 percent to 2 percent. But the airline warned it may adjust its flight schedule in the fall based on market conditions.
Delta in Utah
The carrier, whose westernmost hub is Salt Lake City International Airport, employs about 3,200 people in the state, including 600 pilots.