Delta Air Lines Inc. is flying high by most measures.
The nation’s No. 3 airline just reported its best fiscal third quarter ever, its stock recently traded at a record high and it’s expanding in the lucrative European market. Traffic also is on the rise as Delta picks up jittery flyers from rival ValuJet Inc. after one of that airline’s planes crashed last month in the Florida Everglades, killing 110 people.
The one thing that might stop Delta, some experts say, is its effort to copy none other than ValuJet and launch a low-cost, no-frills operation. It’s a risky move into a business littered with bankrupt budget airlines.
“Delta doesn’t know what it’s doing,” said Barbara Beyer, an executive with the aviation consulting firm AvMark Inc.
Major carriers have never figured out how to turn a profit with a budget airline. And, in devoting time and money to a low-fare product, Delta may miss more crucial goals - like finally making a consistent profit on the European routes it bought from bankrupt Pan Am Corp. five years ago, experts said.
If the carrier goes ahead with a low-cost service, that’s the time for investors to “sell their Delta stock,” said Michael Boyd, a Colorado-based aviation consultant.
While keeping details under wrap, Atlanta-based Delta is working hard on Project Sunshine, designed to snare ValuJet’s passengers: penny-pinching travelers who would likely drive or take a bus if not for bargain-basement fares as low as $29.
The idea is to take Delta’s fleet of 54 old Boeing 737-200 airplanes and fly them point-to-point on north-south routes, with many of the flights between the Northeast and Florida, skipping its own hub in Atlanta where labor costs are sky high. Delta’s pilots agreed to staff the new operation for pay that’s 32 percent below the union scale.
Delta reasons that a no-frills service using smaller, less-crowded airports will let it cut the time to load and fuel a plane by almost 40 minutes. That would result in more flights a day and help the carrier pare costs and slash fares. It’s the same formula that ValuJet, also headquartered in Atlanta, used to triple net income to $67.8 million in 1995.
Delta closed Friday at $83.12-1/2, up 25 cents for the week.
Some of the stocks that moved substantially or traded heavily Friday:
IBM, up 1/2 at 101-3/4.
The stock rebound from loss of more than five points after several investment firms downgraded their assessment of the computer maker’s prospects. An an analyst briefing had prompted concerns about higher-than-expected costs and the strong dollar, which eats into the value of foreign revenues.
DCX, down 1-9/16 at 1-7/8.
The company on Thursday rescinded an agreement to buy Airtech International after DCX stock fell 37 percent following the deal’s announcement that day. DCX, which makes electronic devices used in the aerospace industry, said Thursday morning it would acquire privately held Airtech, a distributor of air-purification systems, for an undisclosed amount of stock. DCX announced the deal’s termination after trading closed.
Presstek, up 17-1/2 at 95.
The printing-technology company’s shares rebounded slightly after plunging amid reports of an SEC probe into possible stock manipulation and a disclosure that Presstek’s chairman and his son may sell a large part of their holdings.
Atria Software, down 31/2 at 60-1/2.
Pure Software agreed to acquire Atria for about $872.5 million in stock, or about $61 a share, based Pure Software’s recent trading range. Under agreement, announced Thursday evening, Pure Software will issue 1.544615 shares for each share of Atria.