The New York Times-20080124-Fuel Prices Hurt Delta- But Hedge Lifts Southwest

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Fuel Prices Hurt Delta, But Hedge Lifts Southwest

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ATLANTA -- Delta Air Lines, the nation's No. 3 carrier, said Wednesday that it was hampered by high fuel prices in the fourth quarter but was able to narrow its loss because of a solid increase in sales.

A rival carrier, Southwest, however, reported that its profit doubled in the quarter because of its hedging against high fuel costs,

Delta, which is based in Atlanta, said that it lost $70 million, or 18 cents a share, in the fourth quarter, compared with a loss of $1.98 billion for the same period a year earlier. The airline did not provide a per share figure for the previous year, when it was in bankruptcy.

Excluding reorganization items, Delta said it lost $105 million in the quarter. Analysts surveyed by Thomson Financial had expected a loss of 18 cents a share. Analysts' estimates generally exclude one-time items.

Revenue rose 10 percent to $4.68 billion, compared with $4.25 billion recorded a year earlier.

In the quarter, Delta hedged 21 percent of its fuel consumption, resulting in an average fuel price of $2.61 a gallon. Delta said it realized roughly $40 million in cash gains on fuel hedge contracts settled during the quarter.

Even so, it said it spent $1.36 billion on fuel and related taxes in the quarter, compared with $1.06 billion a year earlier.

Southwest, on the other hand, said fuel hedging helped it post a profit again in the fourth quarter, but the chief executive, Gary C. Kelly, did not rule out the possibility Wednesday that the airline might lose money in the first three months of this year.

Our goal for the year is to drive earnings increases, Mr. Kelly said. It will be harder in the first quarter because of that cost hurdle.

In the fourth quarter, Southwest earned $111 million, or 15 cents a share, compared with a profit of $57 million, or 7 cents a share, a year earlier.

The company said profit excluding one-time gains was 12 cents a share.

Analysts had expected Southwest to earn 10 cents a share, according to a Thomson Financial survey.

Revenue rose 9 percent, to $2.49 billion, just above analysts' forecast of $2.48 billion.

For the current quarter, which ends March 31, Southwest estimates it will pay about $2 a gallon for fuel, even with hedging. That's up from $1.72 a gallon in the fourth quarter.