January 23, 2013 in Business

Sandy, special costs sap Delta’s quarter

But airline’s stock price still rises after results beat expectations
Associated Press
 
Associated Press photo

Travelers on Delta Air Lines pass a departure screen on Oct. 29 in Detroit.
(Full-size photo)

Money over miles

 Delta says its frequent flier program will increasingly favor big spenders over people who simply rack up miles.

 Most airlines reward how many miles you fly, not how many dollars you spend. But Delta Air Lines Inc. President Ed Bastian said on Tuesday that future changes would likely favor travelers who spend more.

 Last week Delta announced that frequent fliers would need to spend a minimum amount of money to earn a higher frequent-flier status.

MINNEAPOLIS – Delta Air Lines Inc. said Tuesday that its fourth-quarter profit was nearly wiped out by Superstorm Sandy and special charges.

The storm forced airlines to cancel more than 20,000 flights. The impact was bigger at Delta because Sandy also slowed down operations at its new oil refinery near Philadelphia.

Delta’s goal in restarting the refinery was to maximize jet fuel production and reduce its fuel bill. But Sandy slowed the refinery’s restart. The refinery lost $63 million for the quarter and added 7 cents per gallon to the price of Delta’s jet fuel. Delta said it expects the refinery to be profitable in the current quarter.

Delta said Sandy cut $100 million from its fourth-quarter profit. It recorded another $231 million in special items. What was left was net income for the quarter of $7 million, or a penny per share. During the same period last year Delta earned $425 million, or 51 cents per share.

Without special items, earnings would have been $238 million, or 28 cents per share.

Revenue rose 2 percent to $8.6 billion. Both the adjusted profit and the revenue were slightly better than expected by analysts surveyed by FactSet.

Managers said on a conference call that they’re focused on improving profit margins. Delta also said it expects lower fuel prices in the first quarter. Delta has said it wants to look into using crude oil from North Dakota at the refinery, which currently uses oil that arrives by ship. The refinery will get a shipment of North Dakota oil this quarter as a test, said Chief Financial Officer Paul Jacobson.

J.P. Morgan analyst Jamie Baker raised his first-quarter profit estimate, citing lower fuel prices and strong travel demand.

Shares of Delta, based in Atlanta, rose 40 cents, or 2.9 percent, to close at $14.01.

Delta’s 2012 profit rose 18 percent to $1 billion, or $1.19 per share.

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