Airline posts $363M profit, says demand strong for holidays

MINNEAPOLIS - Delta Air Lines Inc. posted a $363 million profit on Wednesday as international and business travelers returned to the skies.

The company expects a fourth-quarter profit, too, and said demand is strong heading into the holiday season. That's likely to mean travelers will pay more to fly than they would have last year.

Delta said it will manage advanced bookings to get the best yields. Airlines generally do that by keeping prices high, hoping that late-booking passengers will pay more to fill seats than a bargain-hunting early shopper would have.

"We want to make sure we're leaving seats for our high-value customers, and not selling out too quickly in the face of strong demand," President Ed Bastian said on a conference call.

Some airline passengers might not like that thinking, but airline investors do. Delta shares rose $1.04, or 8.9 percent to $12.74 in afternoon trading.

The Atlanta company's profit worked out to 43 cents per share. If not for one-time items, its profit would have been $929 million, or $1.10 per share. Revenue rose 18 percent to $8.95 billion.

Analysts surveyed by Thomson Reuters expected a profit of 94 cents per share on revenue of $8.82 billion.

A year earlier, airlines were struggling with a sharp pullback in business travel. Airlines that depend on international travel, like Delta, suffered the most. A year ago Delta lost $161 million during the third quarter.

Delta is adding seats in the fourth quarter, with overall capacity rising 5 percent to 7 percent. Most of that is on international flights, which it reduced sharply a year ago.

In the most recent quarter, Delta, the leading U.S. carrier to Asia, reported that passenger revenue across the Pacific jumped 54 percent. Atlantic passenger revenue rose 25 percent, versus 12 percent for domestic flights.

Overall, passenger revenue rose 19 percent on higher demand and ticket prices.

Higher baggage fees accounted for most of a $75 million increase in Delta's non-flying revenue.

With all this money coming in, Delta is paying down debt, including $750 million during the third quarter. "Debt reduction is one of our highest financial priorities," CEO Richard Anderson said.

Delta had $15.2 billion in debt minus cash at the end of the quarter. It's aiming for $10 billion by 2012.

Southwest Airlines Co. has proposed to buy AirTran Airways, which has a hub in Delta's home city of Atlanta. Some have wondered whether Southwest's entry into Delta's largest hub would hurt the bigger airline.

Anderson said Delta could actually benefit because AirTran offered a business class. Southwest's planes are all-coach.

Delta said it will shrink its fleet by 20 to 30 smaller planes next year, including regional jets and the DC-9s it got when it purchased Northwest Airlines in 2008. Bastian said Delta will still fly some DC-9-50s after next year. Those planes can seat 125 passengers. It is also taking delivery of a small number of MD-90s, which have seating capacity of 160.

Delta also said it is asking the Transportation Department to reconsider approval of a proposed swap with US Airways Group Inc. of landing rights at New York-LaGuardia and Reagan National in Washington.