April 23 (Bloomberg) -- Delta Air Lines Inc. and Northwest Airlines Corp. blamed surging fuel prices for first-quarter losses as they prepare to combine and form the world's largest carrier.

Their deficits mean that all five of the biggest U.S. airlines were unprofitable last quarter, when jet-fuel prices jumped 63 percent from a year earlier. Delta and Northwest are joining peers in parking planes and boosting fares to help cover the rising costs.

``They figure, `Look, we can't run these routes at a loss.' So they're cutting back,'' Daniel Kasper, managing director of consulting firm LECG Corp. in Cambridge, Massachusetts, said in an interview. ``That will help firm up prices.''

Delta's loss, before a bankruptcy-related charge, was $274 million, or 69 cents a share. Northwest said its deficit was $191 million, or 78 cents, before costs also related to its bankruptcy. Analysts expected narrower losses on that basis.

Delta fell 24 cents, or 3.5 percent, to $6.56 at 4:01 p.m. in New York Stock Exchange composite trading, while Northwest slipped 37 cents, or 5 percent, to $7.10. Those were the lowest closing prices since the shares started trading as part of the airlines' exit from court protection. Atlanta-based Delta left bankruptcy on April 30; Northwest followed on May 31.

Merger Benefits

Today's back-to-back earnings reports gave Delta Chief Executive Officer Richard Anderson and Northwest CEO Doug Steenland a platform to promote the tie-up they announced April 14. Delta is buying Northwest in an all-stock transaction valued at $2.3 billion, down 36 percent since it was disclosed.

The deal will produce more than the $1 billion in revenue and savings originally forecast, the executives said today.

``We were conservative in the estimates of the synergies,'' Steenland said on a conference call. ``As the process goes forward and gets more detailed, I'm highly confident that number will increase.''

The losses by Delta and Northwest pushed the first-quarter deficit among major U.S. carriers to $1.38 billion. US Airways Group Inc. will post a loss tomorrow, based on analysts' estimates, meaning the total for the eight biggest U.S. airlines probably will top the $1.4 billion projection of Merrill Lynch & Co. analyst Michael Linenberg.

Delta

Including a $6.1 billion non-cash cost linked to a drop in its market capitalization since emerging from bankruptcy, Delta's deficit was $6.39 billion, or $16.15 a share.

Delta's loss was driven by a jump of $585 million, or 50 percent, in spending on jet fuel, its largest cost. The price Delta paid per gallon climbed 48 percent to $2.85. Revenue rose 12 percent to $4.77 billion.

``There is no doubt that sustained high fuel prices are a serious threat to this industry,'' Chief Financial Officer Ed Bastian said on a conference call with analysts.

Without the bankruptcy-related cost, Delta's per-share loss exceeded the 51-cent average of 12 analyst estimates compiled by Bloomberg.

Delta said today it would remove as many as 70 regional jets from service by the end of 2008, up from 25 it announced last month and including more than 30 under contract with Mesa Air Group Inc. that Delta wants to terminate. It also is parking as many as 20 mainline jets, the same number announced in March.

That will leave Delta's capacity, including regional airline partners, unchanged from 2007. Capacity will drop as much as 8 percent in the U.S., while increasing as much as 16 percent in international markets. Delta is the third-largest U.S. carrier by traffic.

`Solid' Demand

Domestic travel demand remains ``solid,'' even as a slowing U.S. economy raises concern in the industry that corporate and leisure fliers may stay home, Bastian said.

The airline will continue to be ``aggressive'' in pruning flying as costs rise, Anderson said on the call. Delta has slowed international expansion plans ``slightly,'' said Glen Hauenstein, executive vice president of revenue management.

``What we're seeing is still very robust traffic and yields, but we're being cautious given the economic outlook and the fuel impact,'' he said.

Delta's cutbacks also include a plan announced in March to eliminate 2,000 non-pilot jobs in the U.S., or 3.6 percent of its workforce, through buyouts and voluntary retirements.

Northwest

Northwest's loss, including a $3.9 billion non-cash expense and other costs, was $4.1 billion, or $15.78 a share, the Eagan, Minnesota-based carrier said in a statement. Sales rose 8.8 percent to $3.13 billion.

Spending on jet fuel jumped 58 percent, to $1.11 billion, according to Northwest, the fifth-largest U.S. carrier by traffic.

Excluding the $3.9 billion charge, Northwest was expected to have a loss of 34 cents a share, the average of estimates from nine analysts compiled by Bloomberg. On that basis, and excluding a $13 million cost linked to fuel hedging, the loss was 73 cents.

Northwest's year-earlier net loss, when the company was still in bankruptcy protection, was $292 million.

Northwest earlier announced plans to trim domestic capacity by 5 percent after the summer travel season by removing as many as 20 planes from flying.

``We will be very aggressive and very focused with respect to making sure we do get costs out related to capacity reductions,'' Steenland said on Northwest's conference call.

The carrier today also said it will suspend cargo freighter service to Guangzhou, China, on July 1 and to Taipei on Aug. 1 to help improve profit. Separately, Northwest said it will increase its fuel surcharge for some domestic and international cargo shipments by 11 percent, effective May 1.

To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@kbloomberg.net.

Last Updated: April 23, 2008 19:33 EDT