Delta Airlines and United Airlines' parent UAL Corp, reported first-quarter net loss due to the sharp intensification of recession in the US and in major economies around the world making customers limit their air travel.
Delta, the world's largest airline, reporting its first quarterly result after its merger with Northwest Airline in October, said that its first-quarter loss was $794 million compared to its $6.4-billion loss in first-quarter of 2008.
Reporting its sixth consecutive quarter loss, Delta said that the combined operations of Delta and Northwest decreased 12.6 per cent in the first-quarter 2009 compared to a 7.9 decrease in capacity in March 2008.
Domestic traffic decreased 11.1 per cent year over year while international traffic decreased 15.1 per cent year over year but revenue for the both the airlines rose almost 40 per cent to $6.7 billion.
While the Q1 figures are for the Delta and Northwest, the last year's 1Q figures are for the pre-merger Delta operations.
The Atlanta-based airline said that it had incurred a one-time cost of nearly $100 million, which includes $50 million for severance payments to employees who took buyouts in January and $49 million for merger-related expenses but the result excluded $684-million loss derived out of fuel hedge losses.
In the March 2009 quarter, Delta said that it realised approximately $100 million in synergy benefits from its merger with Northwest Airlines.
Delta also gave $6 million to its employees for meeting February operational performance goals.
In an attempt to cut costs and generate about $100 million in annual revenue, Delta said it would ground its entire fleet of 14 747 freighters since its cargo revenue declined by 44 per cent in the first quarter compared to the first quarter last year, and charge customers a $50 fee to check in a second bag starting from 1 July.
The combined cargo revenue of Delta and Northwest was $185 million this first-quarter compared to $331 million in the first quarter of 2008.
United Airlines parent UAL Corporation posted a first-quarter net loss of $382 million, compared to $549 million loss in the same quarter last year.
The Chicago-based airline said that its first-quarter loss would have been $579 million had it not been for the gains from the non-cash hedging and other charges.
The airline said that the losses were derived from the one-time lease termination costs and charges related to severance and employee benefits and the company chairman, president and CEO Glenn Tilton said that the losses were also due to the recession having a severe effect on demand for travel and cautioned that there was no evidence that the demand has bottomed out.
The airline's operating loss was $282 million, which came down from $441 million in the first-quarter last year and said that for the current year, the flight capacity demand is expected to be down 9 to10 per cent.
Since July, the airline saved $729 million in quarterly fuel costs due to declining fuel prices and it has cash balance of $2.5 billion.
Since the main revenue for airlines comes from their business travelers, this segment's traffic is down by nearly 20 per cent, which erodes the bottom line of all carriers.
UAL's business segment travelers was down by 30 per cent since most of the travelers in this segment downgraded themselves to economy class.
Last week, the airline said that it would charge obese, economy-class passengers for a second economy seat or for upgrading to a larger seat in business or first class, if necessary. The policy applies to United and United Express flights. (See: Obese fliers on United Airlines may be required to pay for two seats)
Under the new policy, obese passengers - defined as those who are unable to lower the armrest and buckle a seat belt with one extension belt - will still be accommodated, at no extra charge, in two empty seats if there is space available.
But some airlines handle the situation differently. American Airlines uses a case-by-case approach. If a flight is full, Delta Air Lines offers a heavy passenger the option of buying a second seat on the next available flight at the lowest fare available, which may not be as cheap as what the passenger paid for the first seat.